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Document o f The World Bank
FOR OFFICIAL USE ONLY
Report No: 39307 - MZ
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 9.9 MILLION (US$15 MILLION EQUIVALENT)
TO THE
REPUBLIC OF MOZAMBIQUE
FOR A
WATER SERVICES AND INSTITUTIONAL SUPPORT PROJECT
August 7,2007
Water and Urban Unit 1 (AFTU1) Mozambique Country Department Africa Region
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective June 2 1,2007)
AAP ACGF AdeM AfDB AMU CAS CEM CFAA CPS CQS CRA DAU DHS DMF DNA EIB EU FIPAG
FMR GAPASU
GoM IAF
I C A ICR IDA IFAC IRA1 JICA JSAN
Currency Unit = New Meticais (Mtn) 26.02Mtn = US$1 US$1.51 = SDR1
FISCAL YEAR
January 1 - December 31
ABBREVIATIONS AND ACRONYMS
Africa Action Plan Afr ica Catalytic Growth Fund Aguas de MoFambique (Water o f Mozambique) African Development Bank Asset Management Unit Country Assistance Strategy Country Economic Memorandum Country Financial Accountability Assessment Country Partnership Strategy Consultant Qualifications Selection Conselho de RegulaF6o do Abastecimento de Agua (Water Regulatory Council) Department o f Urban Water Demographic and Health Survey Delegated Management Framework Direcq6o Nacional de Aguas (National Directorate for Water Affairs) European Investment Bank European Union Fundo de Investimento e Patrimdnio do Abastecimento de Agua (Water Supply Investment Fund) Financial Management Report Gabinete de Gest6o do Patrimdnio do Abastecimento de Agua e Saneamento (Office o f Urban Water Supply and Sanitation) Government o f Mozambique Inque'rito aos Agregados Familiares sobre OrGamento Familiar (Household
Investment Climate Assessment Implementation Completion Review International Development Association International Federation o f Accountants IDA Resource Allocation Index Japan International Cooperation Agency Joint Staff Assessment Note
Survey)
FOR OFFICIAL USE ONLY
LCS MAE MCC MDG MDRI MOPH M O U NWDP PARPA PEFA PFM PRSC PWB QCBS RPF SBD S I L SWAP T A UNICEF WSP wss VAT
Least Cost Selection Ministe‘rio du Administrucqio Estutul (Ministry o f State Administration) Millennium Challenge Corporation Millennium Development Goal Multilateral Debt Rel ief Initiative Ministdrio dus Obrus Pliblicus e Hubituqio (Ministry o f Public Works and Housing) Memorandum o f Understanding National Water Development Project Poverty Reduction Action Plan Public Expenditure and Financial Accountability Public Finance Management Poverty Reduction Support Credit Provincial Water Board Quality and Cost Based Selection Resettlement Policy Framework Standard Bidding Documents Sector Investment Loan Sector Wide Approach Technical Assistance United Nations Children’s Fund Water and Sanitation Program Water Supply and Sanitation Value Added Tax
Vice President: Obiageli Katryn Ezekwesili Country Director: Michael Baxter
Sector Manager: Jaime Biderman N. Jane Walker Task Team Leader:
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
MOZAMBIQUE Water Services and Institutional Support Project
CONTENTS Page
CONTEXT AND RATIONALE .......................................................................................... 5 I . A . B . C .
I1 . A . B . C . D . E .
I11 . A . B . C . D . E . F .
I V . A . B . C . D . E . F . G .
Country and sector issues ................................................................................................. 5 Rationale for Bank involvement ...................................................................................... 8 Higher level objectives to which the project contributes ............................................ 10
PROJECT DESCRIPTION ........................................................................................... 14
Lending instrument ........................................................................................................ 14
Program development objective and key indicators ................................................... 15 Project development objective and key indicators ...................................................... 15 Project components ......................................................................................................... 15
Lessons learned and reflected in the project design .................................................... 19
IMPLEMENTATION .................................................................................................... 20 Partnership arrangements ............................................................................................. 20 Institutional and implementation arrangements ......................................................... 20
Monitoring and evaluation of outcomes/results ........................................................... 20 Sustainability ................................................................................................................... 21
Critical risks and possible controversial aspects .......................................................... 22
Credit conditions and covenants .................................................................................... 23
APPRAISAL SUMMARY ............................................................................................. 24
Economic and Financial Analyses ................................................................................. 24
Technical .......................................................................................................................... 27 Fiduciary .......................................................................................................................... 28
Environment .................................................................................................................... 29 Social: Stakeholders consultation .................................................................................. 29
Safeguard policies ........................................................................................................... 30
Policy Exceptions and Readiness ................................................................................... 30
Annex 1: Country and Sector or Program Background ......................................................... 31
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 34
Annex 3: Results Framework and Monitoring ........................................................................ 35
Annex 4: Detailed Project Description ...................................................................................... 38
Annex 5: Project Costs ............................................................................................................... 44
Annex 6: Implementation Arrangements ................................................................................. 45
Annex 7: Financial Management and Disbursement Arrangements ..................................... 47
Annex 8: Procurement Arrangements ...................................................................................... 56
Annex 9: Economic and Financial Analyses ............................................................................. 63
Annex 10: Safeguard Policy Issues ............................................................................................ 69
Annex 11: Project Preparation and Supervision ..................................................................... 71
Annex 12: Statement o f Loans and Credits .............................................................................. 72
Annex 13: Country at a Glance ................................................................................................. 74
Annex 14: HIV/AIDS Policy o f Implementing Agencies ......................................................... 76
Annex 15: Africa Catalytic Growth Fund Request ................................................................. 78
Annex 16: Maps . IBRD 35608 ................................................................................................. 86
MOZAMBIQUE
Source Local BORRO WEWRECIPIENT 0.00 International Development Association 8.1 (IDA) Africa Catalytic Growth Fund (ACGF) 8.1 Total: 16.2
WATER SERVICES AND INSTITUTIONAL SUPPORT PROJECT
Foreign Tota l 0.00 0.00 6.9 15.00
6.9 15.00 13.8 30.00
PROJECT APPRAISAL DOCUMENT
AFRICA
AFTUl
Date: August 7,2007 Country Director: Michael Baxter Sector ManagedDirector: Jaime M. Biderman
Project ID: P104566
Lending Instrument: Specific Investment Loan
[ ] Loan [XI Credit [ ] Grant [ ] Guarantee [ ] Other:
Team Leader: N. Jane Walker Sectors: Water supply (1 00%) Themes: Access to urban services and housing
Environmental screening category: Partial Assessment
Project Financing Data
(PI
Borrower: Republic o f Mozambique Responsible Agency: FIPAG Rua General Pereira d'Eca N. 241 WC, PO Box 917 Maputo, Mozambique www. fipag. co.mz
DNA 942 Av 25 de Setembro, 3'h Floor, PO Box Maputo, Mozambique
CRA
61 1
Avenida Amilcar Cabral, No. 757, PO Box 235 Maputo, Mozambique
1
I
Expected closing date October 31,2012
Grant Implementation Period: Start October 3 1 , 2007 3 1 , 2007, End October 3 1 , 201 1 Expected effectiveness date: October 3 1 , 2007 Expected closing date October 3 1 , 201 1
Does the project depart from the CAS in content or other significant respects? Ref: PAD A.3 Does the project require any exceptions from Bank policies? Ref: PAD D. 7
I s approval for any pol icy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Ref: PAD III.E Does the project meet the Regional criteria for readiness for implementation? Ref: PAD D. 7 N o Project development objective Ref: PAD B.2, Technical Annex 3 The development objective o f the project i s to increase water service coverage in the cities of Beira, Nampula, Quelimane, and Pemba under the delegated management framework and to
[ [x No
[ ]Yes [ X I N o
[ ]Yes [ X I N o
[ X I Y e s [ ] N o
[ X ]Yes [ ]
Have these been approved by Bank management? [ ]Yes [ IN0
establish an institutional and regulatory framework for water supply in smaller cities and towns. Project description [one-sentence summary of each component] Ref: PAD B.3.a, Technical Annex 4 The project will finance the following three components: (A) Investments and continuing support in the 4 cities o f Beira, Nampula, Quelimane, and Pemba under the responsibility o f FIPAG: The project wil l support an improvement o f water supply access f rom the construction o f approximate 370 kilometers o f network resulting in 10,000 new connections in the 4 cities. (B) Capacity building, institutional and operational support to DNA: The project wil l establish and operationalize the Asset Management Unit (AMU) and provincial water boards (PWBs). Under this component, the project wil l also support the preparation o f the SWAP for the rural water sub-sector. (C) Operational support to C R A with respect to expanded regulatory responsibility for smaller towns and cities: The project wil l support the development o f regulatory frameworks to cover the smaller towns and cities as AMU i s set-up and expanded via the Provincial Water Boards.
2
Which safeguard policies are triggered, if any? Ref: PAD D. 6, Technical Annex 10
Environmental Assessment Involuntary resettlement Significant, non-standard conditions, if any, for: Ref: PAD C. 7
Board presentation: September 4,2007
Loadcredit effectiveness:
Effectiveness conditions for IDA Credit:
0
0
0
Satisfactory legal opinions on the Financing Agreement, Project Agreements and Subsidiary Agreements are made available. FIPAG and C R A have caused that the existing financial management systems be adjusted for the purposes o f the Project, satisfactory to the Association in form and substance. FIPAG and C R A have each adopted the relevant Project Procurement Manual adjusted for the purposes o f the Project, satisfactory to the Association in form and substance. The execution and delivery of the African Catalytic Growth Fund Agreement has been duly authorized.
Effectiveness conditions for ACGF Grant:
0
0
0
Satisfactory legal opinions o n the Grant Agreement, Project Agreements and Subsidiary Agreements are made available. FIPAG and C R A have caused that the existing financial management systems be adjusted for the purposes o f the Project, satisfactory to the Association in form and substance. FIPAG and CRA have each adopted the relevant Project Procurement Manual adjusted for the purposes o f the Project, satisfactory to the Association in form and substance.
Financial and Other Covenants applicable to project implementation:
0 During the 12 month after the Mid-Term Review, the financing gap in the operational cost support to the Asset Management Unit in the years 2013-2015 will be quantified and the G o M will make provisions to cover these costs. Within twelve months o f the Effective Date o f the Project, the AMU shall be established by decree. The C R A and FIPAG will maintain financial management systems in accordance with international accounting standards, and have their entity financial statements and the project financial statements audited in accordance with international auditing standards. These audits shall cover the period o f one Fiscal Year. The audits for each such period shall be finished to the Association not later than six months after the end o f such period. The tariffs for the systems under the responsibility o f FIPAG shall reflect the principles o f full cost recovery and be sufficient to cover operating expenses, depreciation, and cost o f capital in a reasonable time horizon for al l said systems. The tariffs will be assessed during the Mid-Term Review.
0
0
3
Within eighteen months after the Effective Date, a l l outstanding public sector arrears to FIPAG are settled and ensure that a mechanism to pay future publ ic sector water bills be put in place. FIPAG shall ensure that it: (i) covers 1.2 times i ts debt services requirements through i ts net revenues; and (ii) does no t incur any additional debt unless a reasonable forecast o f i t s revenues and expenditures show that i ts projected net revenues for each Fiscal Year during the term o f the debt to be incurred shall b e at least 1.5 times the projected debt service reauirements.
0
4
I. CONTEXT AND RATIONALE
1. year US$30 m i l l i on project funded by the Af i ica Catalytic Growth Fund (ACGF) and the International Development Association (IDA). I t i s designed as a repeater project for the National Water Development Project I1 (NWDP 11) and will continue long te rm support provided to the water sector in Mozambique. WASIS wil l facilitate access and improved water services to an additional 137,000' households in Beira, Nampula, Quelimane, and Pemba, four o f the cities whose water supplies improved under NWDP 11. I t will continue the use o f private sector participation with a second generation o f private sector contracts in these cities. The project will also widen the successful implementation models developed under NWDP I1 to include smaller cities and towns. I t wil l also provide institutional support for the development o f a sector wide approach (SWAP) for the rural water sub-sector. I t will attract other donor resources and encourage local private sector partners to scale up and replicate the successful approach under NWDP 11.
The proposed Water Sector Services and Institutional Support (WASIS) Project is a 5-
2. water sector in Southern and East Afiica. The legal establishment o f Fundo de Investimento e Patrimbnio do Abastecimento de kgua - FIPAG (the asset holding company) and Conselho de RegulapTo do Abastecimento de kgua - CRA (Water Regulatory Council) at the end o f 1998 provided the basis for remarkable progress. Water services in the f ive cities, supported under NWDP I1 and under FIPAG's mandate, improved reliability, quality, and sustainability o f water services. The project was cited in the mid-term Country Assistance Strategy (CAS) review as one o f the f ive key successful CAS results. NWDP 11 is scheduled to close on March 30,2008. The project was approved o n June 17, 1999 and became effective o n March 8,2000. The original credit amount was SDR55.4 mi l l ion (US$75 m i l l i on equivalent). A supplementary credit o f SDR 10.2 mi l l ion (US$15 mi l l ion equivalent) was approved on February 26,2004. About 63 percent o f the credit was disbursed and 95 percent o f the remaining credit has been committed as o f June, 2007.
NWDP I1 i s considered a flagship project for the use o f private sector participation in the
A. Country and sector issues
3, mi l l ion people with more than 70 percent o f the population in rural areas, i s located in the southern tip o f the Afr ican continent. Coming out o f a devastating three-decade c iv i l war in 1992, Mozambique grew rapidly. Since 2000, its growth rate has stabilized at between 7 and 8 percent. As the Country Partnership Strategy (2007) notes, Mozambique has achieved the highest average growth rate in the past 10 years among the non-oil producing countries in Africa. Concurrent with growth, Mozambique also succeeded in containing poverty and enhancing access to social services. The rate o f pro-poor growth at 3.9 percent in the past decade implies that poverty reduction in Mozambique was equitable, with al l groups including the bottom quintile o f population, benefiting from economic growth. Although poverty is concentrated in the rural areas, this reduction was unique in Af i ica because rural poverty fe l l faster than urban poverty (Country Economic Memorandum, 2005). At the current rate o f growth, Mozambique i s
Poverty reduction and the role of efficient service delivery. Mozambique, a country o f 20
1 Based on the maximum connections possible f i om the production capacity (volume o f water) built under NWDP I1 (elaborated in Table 1).
5
o n track to meet the MDG o f halving the population living in poverty by 2015. In spite o f impressive progress, 10 mi l l ion Mozambicans st i l l l ive in absolute poverty (PARPA I12).
4. decade - PARPA I (2001-2005) and PARPA I1 (2006-2009) are based o n the premise that broad- based economic growth i s critical to poverty reduction. In PARPA I, lack o f basic infrastructure3 services was identified as one o f the major determinants o f rural poverty in Mozambique and the G o M focused on infrastructure investments to meet its ambitious growth objectives. Building o n the lessons learnt from PARPA I, the G o M outlines investment in human capital, including water and sanitation services, as one o f the three pillars to meet i t s sustained growth agenda in PARPA 11. As PARPA I1 notes, investing in water services contributes to meeting not only the short-term objectives o f the MDGs, but also Mozambique’s long-term growth and poverty reduction plans.
The Government o f Mozambique (GoM)’s action plan for poverty reduction in the past
5. expansion in Mozambique. Access to potable water significantly affects the overall well-being o f people through i t s impact o n health, education, gender equality, and productivity. Provision o f water i s particularly important for ago-industrial enterprises, o n which the bulk o f the rural economy depends. Reliability o f services has been identified as one o f the key constraints to the business environment in the 2002 Investment Climate Assessment (ICA) for Mozambique. The water and sanitation services in smaller cities and market towns in Mozambique are particularly l o w in coverage, reliability, and quality. Under WASIS, these services would be improved in several key port cities and market centers, alleviating some o f the key constraints to growth in Mozambique. An increase in the number o f “livable” cities and market centers would also help establish focal points for surrounding agriculture areas which can serve as a central location for post-harvesting facilities, aggregation o f products, diversification o f crops, and promotion of business development.
Provision o f potable and reliable water supply i s a critical element o f infrastructure
6. Water Pol icy and subsequent sector reform in Mozambique are positive. The sector has made significant progress, both institutionally and o n the ground, especially in the larger cities with the pol icy o f delegated management coupled with a robust regulatory framework. FIPAG and CRA are functioning wel l and achieving results according to their mandate (see Box 1). For the rural areas, characterized by small piped village systems and point source (boreholes with hand pumps), a demand driven community managed model was developed in the early 2000s and piloted in a number o f communities. The pilots have been successful but, as over 70 percent o f the population l ives in rural areas, the challenge remains enormous. A neglected area o f sector strategy i s addressing the needs o f smaller cities and towns. There are over 33 municipalities in Mozambique and the urban growth rate o n average is approaching 4 percent indicating that the pressure on these developing urban areas will increase significantly.
Water reforms have made progress but gaps remain. The results o f the 1995 National
Poverty Reduction Action Plan (PARPA) i s equivalent to the Poverty Reduction Strategy Paper (PRSP). Infrastructure, through its impact on productivity and investment, has a multiplier effect o n growth, thereby
making a dent on poverty. As recent empirical literature notes (Agenor and Dodson, 2006), infrastructure affects growth through various direct and indirect channels. In addition to the conventional effects on productivity and market expansion, infrastructure has long-term effects on well-being through health and education benefits. In recent years, developing countries have focused on growth to meet their social objectives.
2
3
6
Box 1: The success o f the Delegated Management Framework (DMF) - FIPAG and CRA
The organizational principle adopted for future urban water supply systems, anchored in the National Water Policy and the National Water Development Program o f 1995, was the Delegated Management Framework (DMF), which enabled the transfer o f operational responsibilities for water supply to private companies, and introduced changes in the public sector institutions, created new institutions, and strengthened the oversight o f the sector. A key foundation stone in t h i s reform was a new Water Tariff Policy. This far reaching policy aimed at a more rational and commercially-oriented tari f f regime that would support cost recovery and long-term financial sustainability o f the water supply system.
For the provision o f water services in urban areas, a mechanism o f delegated management was put in place for the large systems covering the five main cities in 1999 supported under the N W D P 11. As part o f this, two public institutions were created, independent from the Ministry o f Public Works and Housing (MOPH) and from each other, namely, FIPAG - Fundo de Investmento e Patrimonio do Abastecimento de Agua, which i s the asset holding company and the CRA - Conselho de RegulaqZo do Abastecimento de Aguas, which i s the regulating body for the water systems. Both institutions were created in December 1998.
FIPAG i s a public entity and acts as an Investment and Asset Management institution. FIPAG's responsibilities include: investment and financial management for rehabilitation and expansion o f water supply assets; maximization o f efficiency and return on i t s assets; contract management, monitoring and enforcement of the contractual obligations o f the operators.
By 2007, FIPAG had grown to be responsible for 14 cities and towns from the original five. I t had contracted a private operator, Aguas de Mogambique (a local operator 70% owned by Aguas de Portugal), for the 4-year management contract for the water systems in Beira, Nampula, Pemba and Quelimane. The same operator holds a 15-year lease contract for the water supply system o f Maputo. In the remaining cities, FIPAG i s establishing autonomous water companies in partnership wi th Vitens (a Dutch Operator) under loans from the AfDB and Dutch t rus t funds. Overall FIPAG manages an investment portfolio o f over US$350 million.
CRA i s an independent regulatory agency which i s responsible for balancing the interests o f consumers wi th commercial principles to ensure a viable and sustainable sector under the delegated management framework. CRA regulates the tari f f regime and sets tariffs annually to ensure commercial viability and consumer affordability. CRA reports directly to the Council o f Ministers.
7. National Directorate for Water Affairs (DNA) has the responsibility for the entire water sector. I t manages the majori ty o f the potable water sector schemes in the rural areas, as well as in smaller towns and cities, Overall i t s capacity to undertake this large mandate i s stretched. A major consequence i s a fragmented approach and projects are undertaken by various donors with inadequate coordination provided by DNA. Further, systems that are built suffer from inadequate implementation and follow-up support and up to 35 percent o f rural systems are not working and in need o f repair at any one time, Limited institutional capacity leads to weak absorptive capacity as donor funded projects have generally experienced under-spending as a result o f DNA's weak internal procurement and financial management skills. This i s further exacerbated by payment difficulties with respect to counterpart funds, taxes, and value added tax (VAT). The GoM and sector donors have recognized these shortcomings and DNA and the major donors4 have recently agreed to move towards a comprehensive SWAP for the rural water sector. This approach harmonizes sector planning and monitoring, and provides for more effective aid modalities, in l ine with the Paris Declaration.
SIDA, CIDA, UNICEF, Dutch, AfDB, WSP, JICA, Irish A id
7
B. Rationale for Bank involvement
8. WASIS i s built on the implementation success o f NWDP 11. NWDP I1 began implementation in 2000 and concentrated o n considerable investments in improving the production capacity o f water systems. Capital investment in the four cities (Beira, Nampula, Quelimane, and Pemba) has now secured a supply o f potable water in sufficient quantity to dramatically increase their service coverage. There i s potential to serve about 137,000 households with more investment in distribution (see Table 1 below).
Building on Bank’s experience in Mozambique. The rationale for Bank involvement in
mrease in
water available
9. latest draft o f the Water Supply and Sanitation Flagship for the Afr ica Action Plan. The lessons learned in the last two decades have been instrumental in identifying the critical inputs for sustainable water supply and sanitation. This experience, based o n a number o f examples in the region, provides practical ways to reach the MDGs. In summary, sustainable village water supplies depend upon decentralized, demand-responsive, and community-managed approaches. Town and ci ty water supplies need autonomous water boards and professional operators. Experience has shown that the Bank’s most important role i s in facilitating dialogue o n sector reform and building national programs that donors can support v ia SWAPS.
Building on Bank Experience in the Region. The proposed project i s in line with the
10. initiated to provide funds for countries that have good growth potential and a positive track record for implementation. A key outcome o f ACGF financing i s the opportunity to leverage wider donor support and private sector participation to achieve a scaled up development impact. The ACGF provides rapid targeted support to countries with credible programs to accelerate growth, poverty reduction, and attainment o f MDGs. Mozambique qualifies under the ACGF as a high performing country based on its satisfactory country record and i t s proven results on the ground. The project is eligible for ACGF funds, as i t tackles a hard to reach MDG, crowds in other donors and its demonstrated ability to scale up results and contribute to accelerated economic growth.
Rationale for ACGF Funding. The ACGF’ is a multi-donor trust fund program recently
1 1. reflected in the country’s overall IDA Resource Allocation Index6 o f 3.2 in FY 2005 compared to
Satisfactory Country Record. Mozambique has a sound pol icy framework in place, as
The ACCF Grant i s programmed for 4 years. I t i s expected t o b e fully disbursed by October 3 1,201 1. The W o r l d Bank’s IDA Resource Al location Index (IRAI) i s based o n the results o f the annual CPIA exercise that
5
covers the IDA eligible countries. The CPIA rates countries against a set o f 16 criteria grouped in four clusters: (a)
8
an average o f 3.1 in IDA countries. More specifically, Mozambique scores highly on economic management which includes macroeconomic management, fiscal policy, and debt policy. The debt sustainability analysis conducted by IDA and IMF in 2006 under the Multilateral Debt Rel ief Initiative (MDRI) confirmed that current debt i s sustainable. Mozambique also has in place a credible national strategy for shared growth. The government has been implementing i t s Act ion Plan for reducing absolute poverty (PARPA) for the period 2001 - 2005 and has prepared a new PARPA for the period 2006 - 2009. The latest Joint Staff Assessment (JSAN) o f PARPA implementation was completed in 2005 and found that the Government had implemented the PARPA successfilly by allocating incremental resources to the priori ty areas and by linking program implementation with the budget cycle.
12. Good Results on the Ground. The quality o f the portfolio i s satisfactory overall, with only one operation rated marginally unsatisfactory. The Second Poverty Reduction Support Credit (PRSC) recently disbursed the second US$60 mi l l ion tranche, and a third PRSC has been approved. A C E M has recently been completed and ongoing non-lending services include a poverty assessment, a sub-regional growth study and two pieces o f PSIA. A joint Wor ld Bank Group CAS Progress Report was completed and discussed at the Board in March, 2006. The new Country Partnership Strategy (CPS) has been approved by the Board in M a y 2007.
13. the Paris Declaration. Realistic and we l l articulated development priorities, with ownership f rom the GoM, accompanied the harmonization process which developed from the 2004 Memorandum o f Understanding between Government and donors. Government chose Joint and Mid-year Reviews as the chief vehicle o f donor support, replacing the traditional pledging approach o f Consultative Group meetings. Donor assistance continued to contribute for about 50 percent o f total spending, although aid modalities changed substantially, rapidly shifting from sector and project funding to direct budget support. Increased harmonization has helped focus on the PARPA objectives, moving Government and donor resources increasingly toward the priori ty sectors o f the PARPA. While coordination o f the budget support donors increased predictability o f resource flows, and monitoring o f long-term objectives and medium-term targets, budget support st i l l only accounts for 30 percent o f total aid.
Sector Harmonization. Mozambique has made considerable progress in implementing
14. Crowding in and Scaling-up. Mozambique has demonstrated a credible strategy to achieve progress in meeting the MDGs in the water supply sector for the largest cities through i t s pol icy o f delegated management coupled with a robust regulatory framework. In scaling up this model in urban areas, Mozambique has so far attracted various other funding partners, including the AfDB, the European Un ion (EU), the European Investment Bank (EIB), the French Development Agency, and the Government o f the Netherlands.
15. The proposed project will continue to consolidate gains in urban areas and scale up the DMF to smaller market towns and cities, as we l l as catalyze funding from the United States’ Government’s Millennium Challenge Corporation (MCC). The M C C i s strongly committed to partnering with the IDA to integrate and build on IDA’S extensive knowledge and experience in building institutional capacity, particularly with the successful DMF. Grant funding from M C C in the order o f US$361.5 mi l l ion for infrastructure investments in the water and sanitation sector has been requested by the G o M (See B o x 2).
economic management; (b) structural policies; (c) policies for social inclusion and equity; and (d) public sector management and institutions (World Bank, 2007).
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Box 2: GoM's proposal to MCC for scaling up in the Water Sector
The GoM's proposal to M C C for scaling up services in the Water Sector i s U S $ 361.5 m. This covers the four Northern Provinces o f Zambezia, Cab0 Delgado, Niassa and Nampula. The overall investment activities are proposed as follows: 0
0
US$40 m - 1500 new rural water points in Nampula and Cab0 Delgado. US$72 m - Water Supply in 10 small towns. US$108 m - Water Supply and Sanitation in seven larger municipalities. US$126 m - Water Supply and Sanitation Investments in Quelimane, Pemba and Nampula. US$15.5 m - Capacity Bui lding and Training.
16. The key result expected from the proposed ACGF/IDA project over five years would be scaled up access to water in various parts o f Mozambique. This would be achieved by enabling: (i) IDA to partner with MCC and bring critical institutional and capacity building experience and knowledge to a well-performing but st i l l emerging sector; (ii) expand good practices and extend prudent financial discipline in future operations within the sector to assure financial sustainability; and (iii) establish new regional models for smaller cites and market towns as wel l as sanitationhewer options using the DMF model.
C. Higher level objectives to which the project contributes
17. Meeting the MDGs in Water Supply. In spite o f enhancing Mozambique's growth potential and progressing o n a number o f human development goals, providing sustainable basic service delivery remains a challenge. For instance, in water supply and sanitation (WSS), Mozambique i s among the 24 least developed countries that need to double i t s 1990 - 2004 rate o f increase to reach the MDG target by 2015. I t i s also one o f the few countries where urban service coverage from improved sources is declining - there has been an 11 percentage point decline in urban service coverage during 1990 - 2004. This i s due to a significant increase in urban population, mainly f rom immigration, which grew from 21 to 32 percent o f the total population since 1990 (World Population Prospects, 2006). This trend is l ikely to continue. Statistics o n coverage o f water supply in Mozambique vary widely, even for the same year (see B o x 3). For instance, urban house connections in 1997 are 23.4 percent o f urban population as reported in Demographic and Health Survey (DHS) and 34.7 percent according to the G o M Census. Similarly, in 2003, DHS reported higher proportion o f residents covered by improved water supply compared to the 2003 national household survey Inqukrito aos Agregados Familiares sobre o Orqamento Familiar (IAF).
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Box 3: Who has water and sanitation coverage in Mozambique?
What does an "improved source" (officially) mean? Water i s critical for survival and everyone l iving has access to some form o f drinking water. The key questions are; (i) what type o f access people have, (ii) whether this i s sufficient, and (iii) what it means. According to the WHOAJNICEF Joint Monitoring Program (JMP)', improved sources are household connections, public standpipes, boreholes, protected dug wells, protected springs, and rainwater collection while unimproved sources are unprotected wells, unprotected springs, vendor provided water, bottled water, and tanker truck water. In 2004, 43% o f Mozambicans had access to improved water sources. There are significant differences in coverage among urban and rural residents - 72% o f urban dwellers and 26% o f rural dwellers have access to safe water. Lack o f consistency in urban and rural definitions exacerbates the differences.
What does the GoM report? G o M official figures on water access and investment needs to meet the coverage deficit show that overall access to water supply i s reported to be 40% (37% in urban and 41% in rural) in 2005; Mozambique needs to cover 70% o f its population wi th safe water supply by 2015 to meet i t s MDG targets. The GoM figures are different f rom JMP figures where urban dwellers have higher access to safe water than rural residents. The GoM's view i s that "improved" sources are not sufficient to be ''safe" sources. The GoM's numbers for urban areas are derived from the number o f urban connections - standposts and yard taps - that are installed via utility companies or municipalities and are regulated or overseen either by CRA or DNA. For example these statistics would not include the 9,000 consumers served in Maputo by small scale private companies that sell borehole water through metered connections. The water quality i s seldom tested. Similarly, for rural areas, as DNA only consider "officially" mandated boreholes and small piped systems in their estimate o f coverage. There are two factors that affect on the calculation o f water coverage in rural areas - 1) the ru le o f thumb o f 500 people accessing each rural water point while true for densely populated areas may not hold true for the sparsely populated areas; and 2) among the rural water points, not al l o f them are in working order at any time. According to DNA estimates, 30- 35% are not functional at any given time. Therefore, rural access figures can be overstated unless these two factors are taken into account in estimating population covered by rural water points. DNA has now switched to quoting coverage figures in number o f boreholes and not per capita service.
What does the World Bank report? These GOM figures are very different f i om those reported in the World Bank's Country Economic Memorandum (CEM, 2005) that derives i t s access figures from household surveys (IAF) that measure the outcome, according to the MDG definition, From 1996197 to 2002103, the access to safe water sources improved fiom 12 to 27% in rural areas and 54 to 64% in urban areas (CEM, 2005). The reason for the anomalies with the G o M data i s due to the definition o f improved water adopted by different agencies.
What do the household surveys report? As part o f the Africa Infrastructure Country Diagnostic Study (World Bank, forthcoming) that aims to present a Pan-African snapshot o f the health o f water and sanitation sector, household surveys (DHS 1997 and 2003, IAF 200213) were analyzed for Mozambique. The majority o f the population o f Mozambique - 60% depend on well and boreholes to meet the i r water needs. For rural areas in Mozambique (63% o f the population in 2004), the DHS 2003 reports that about 22% o f the population do not have access to an improved source, and depend on surface water and other sources. T lus also means that 80% o f rural households have access to an "improved" source. Significant questions related to t h i s access are the level o f service o f these improved sources and the socio-economic attributes o f the inhabitants. For example, are they working, how far are these sources f i om their house, are they seasonal etc. For urban households, there i s less choice o f water sources than in rural areas. All water in urban areas comes from an improved source as urban areas do not have the opportunity for uncontaminated springs and rivers due to population density. The percentage o f households depending on piped water declined from 50% to 19% between 1997 and 2003 while the population depending on public taps and wells or boreholes increased. This i s also reported in the MDG Status Report (JMP, 2006). I t i s one o f the few countries where urban service coverage from improved sources i s declining - there has been an 11 percentage point decline in urban service coverage from 83 to 72% during 1990-2004. This i s mainly due to an increase in urban population which grew f i om 21 to 32% since 1990 (World Population Prospects, 2006).
JMP primarily collects data from two sources: assessment questionnaires and household surveys (DHS/MICSlCensuses/WHO). For more information on JMP, please refer to www.wssinfo.org
11
18. Harmonization and Partnerships. In Mozambique, the Bank is moving away from project lending towards a programmatic approach in the sector. A C G F support i s also being used to help facilitate this more programmatic approach. This f i t s we l l with DNA’s approach, in cooperation with the major donors, to shift towards a comprehensive SWAP, planned for the rural water sub-sector. This approach harmonizes sector planning and monitoring, and provides for more effective aid modalities, in l ine with the Paris Declaration. B o x 4 sets out the major sub-sector strategies in the water sector and main donor interest.
Box 4: Subsector Strategies in Mozambique and Donor Interest
Urban Water Supply: World Bank, African Development Bank, EU, EIB, French, Dutch, MCC 0
0
0
Delegated management via split in asset management from operators; maximize use o f private operators Strategic investments to increase access and maximize coverage to al l consumers Strong independent economic regulation to assure balance between consumer equity and commercial viability Graduate ut i l i t ies and operations to full cost recovery and eliminate subsides Water and seweragelsanitation providers maximize coordination between the two systems
Smaller Towns and Cities Water Supply: World Bank, African Development Bank, Dutch, MCC, Swiss, Portuguese 0 Delegated management approach via split in asset management f rom operators wi th Asset Management Unit
(AMU) and Provincial Water Boards (PWBs); maximize use o f local private operations for routine technical and financial operations Strong local input via municipalities in planning expansions o f water and sanitation systems to make sure that designs match demands and to provide access and increased coverage at appropriate service levels - stand post vs. individual connections Coordinated and simplified regulatory oversight to assure sustainability and cost recovery o f systems via indirect regulation f i om CRA
0
0
Village and Point Source Water Supply and Sanitation: African Development Bank, Dutch, Danida, Swiss, JICA, Canada, UNICEF, Ireland Aid, India 0
0
0
0
Demand led policy wi th in kind and cash payments upfiont to assure sustainability Capacity building at local level to empower community management and support sustainability o f systems for water and sanitation Supply chain information on spare parts and repairs so appropriate level o f service can be provided and maintained Decentralized and programmatic approach via SWAP
19. Partnership StrategV (CPS), and the Africa Action Plan (‘P). The PARPA I1 l inks poverty with poor environmental conditions and lack o f basic infrastructure services. In particular, i t includes the lack o f potable drinking water and sanitation as a critical area for improvement. The CPS objectives support the growth pillars outlined in PARPA I1 and has set an outcome indicator o f “Improved access, reliability and quality o f water in targeted areas o f high demographic growth” to meet i t s goals in Pillar 2 - Equitable access to public services.
Links to the Action Plan for the Reduction ofAbsolute Poverty (PARPA) It Country
20. The Afr ica Action Plan (AAP) has also been put forward as a response to meeting Africa’s immediate development challenges and i t s focus i s to achieve the M D G s through sustainable service expansion. One o f the major actions in the AAP is ‘‘meeting the infrastructure gap” to support growth, not only for capital requirements but also for operations and maintenance. The AAP Flagship for WSS emphasizes the achievement o f the M D G s for WSS in 17 o f the largest countries (representing 75 percent o f the population o f Africa). The flagship will focus on strengthening the public sector’s ability to manage expanding sector programs and the private sector’s role in providing the goods, works and services. The Bank will
12
work with the AfDB and other donors to support the establishment o f national water supply and sanitation programs in the 17 countries. IDA investment in individual countries wil l complement that o f other donors to ensure that investments in rural communities, towns and urban centers are balanced, and capacity-building needs are addressed. The Bank Group will replicate successful experiences with public-private provision o f infrastructure. In Mozambique, ACGF b d i n g wil l be used to scale up a DMF to improve service levels, efficiency, and consumer satisfaction and to crowd in development partners, such as the MCC, to support a broader program to reach over two mi l l ion people with access to safe water.
Eligibility for repeater status:
21. guidelines. These requirements are elaborated below:
The WASIS complies with al l the requirements for repeater projects in the Bank
22. management framework (DMF) that was created under the pol icy reforms o f 1995 and enacted in December 1998 for urban water supply by the Ministry o f Public Works and Housing (MOPH) and the GoM. These reforms were catalyzed and implemented under the NWDP I1 and continued when the private sector underwent significant changes due to change o f ownership in the original private sector operating company. The momentum created by FIPAG and CRA resulted in expanding the DMF from the five original cities to 14 cites with assets under FIPAG management increasing almost four-fold f rom US$90 mi l l ion to US$350 million. NWDP I1 concentrated o n increasing production while the funds for the scale-up investments under WASIS wil l be directed to network expansion and increased connections. An additional component under WASIS will support DNA in repeating the institutional and regulatory model o f an asset holding company and delegated management that worked successfully with FIPAG in larger cities and to apply this framework for smaller cities and towns. The project will also support capacity building under DNA to move forward with a SWAP for rural water supply. DNA was the project implementation agency for NWDP I which closed in October 2005 with a satisfactory rating in the Implementation Completion Report (ICR).
Borrower ownership and interest. There is strong ownership o f the delegated
23. ratings for NWDP 11's implementation progress and development objectives have been consistently satisfactory for the last three years o f implementation. The rating for development objective was downgraded in the very early years o f the project when the ownership o f the private sector operating company was changed and the project operated under a Memorandum o f Understanding (MOU). However, once a new lease agreement was negotiated with the new operating company, the performance o f the project improved and the ISR ratings became satisfactory again. At the beginning o f M a y 2007, about 62 percent o f the IDA credit had been disbursed, but 95 percent was committed. Whi le heavy rains during the 2005 and 2006 construction period slowed completion o f key contracts, the remaining works are scheduled to be completed by the end o f 2007.
24. in the Project Appraisal Document (World Bank Report 19131 MOZ, 1999). The on-going NWDP I1 was cited in the mid-term CAS review as responsible for one o f the five key successful CAS results. The project development objective was to improve the quality, reliability, and sustainability o f water services for the cities o f Maputo, Beira, Quelimane, Nampula, and Pemba through promoting greater private sector participation in the provision o f services.
Project status report ratings for NWDP II. The Implementation Status and Results (ISR)
Impact. The impact o f NWDP I1 has been fully consistent with the expectations set out
13
The results include:
City Maputo 49,027 Bei ra 9,297 Quelimane 953 Pemba 2,234 Nampula 4,438
Baseline (thousand m’) per year
a
a
a
a
a
25.
2007 (thousand m’) per year
68,000 2 1,900 4,600 5,500 7,300
Fiduciary, environment and safeguard issues. There are no unresolved fiduciary, environmental, social or safeguard problems. Procurement and financial management are rated as satisfactory for the project with respect to the ISR ratings for the two executing agencies o f FIPAG and CRA. DNA will be an additional executing agency for the new project, however, C R 4 will act as the procurement and fiduciary agent for DNA and will manage the f low o f funds under the credit for DNA. DNA was the executing agency for NWDP I (which closed in October 1997) and i t s performance was rated satisfactory in these areas o f the ICR.
11. PROJECT DESCRIPTION
A. Lending instrument
26. Grant o f US$15 mi l l ion and an IDA Credit o f US$15 mi l l ion v ia a Specific Investment Loan (SIL). The ACGF wil l crowd in resources from M C C (US$361.5 million) and the Global Partnership for Output Based Aid (GPOBA) o f US$6 mi l l ion to expand access to water. The project i s processed as a repeater.
The total project size i s US$30 mi l l ion and it will be provided in the form o f an ACGF
14
B. Program development objective and key indicators
27. ACGF scaled up program objective and key indicators: The ACGF scaled up development objective, which includes the M C C contribution, will make a significant contribution towards attainment o f the M D G s for water and sanitation in the four northern provinces o f Zambezia, Niassa, Cab0 Delgado, Nampula (including the three major cities o f Nampula, Quelimane and Pemba). The key indicator to meet this objective is: increased access o f served urban population to 52% and increased access o f served rural population to 33% in the four Northern provinces by 2012. Other donor (primarily MCC) and private sector support to help Mozambique to meet i ts PARPA MDG goal (both rural and urban water supply) is expected to be triggered. The technical outputs o f the ACGF wil l be measured by six indicators that are periodically reported under the reporting requirements o f FIPAG (See Table A3-1 in Annex 3).
C. Project development objective and key indicators
28. Project development objective and key indicators: The development objective o f the project is to increase water service coverage in the cities o f Beira, Nampula, Quelimane, and Pemba under the delegated management framework and to establish an institutional and regulatory framework for water supply in smaller cities and towns.
29. The following outputs are expected: Component A: (a) Expansion o f 370 km o f water supply distribution networks; Component B: (a) Legal establishment o f AMU;
(b) Establishment o f two Pilot Provincial Water Boards; (c) Signing o f rural water sub-sector SWAP Memorandum o f Understanding; and
by CRA. Component C: (a) Implementation o f regulatory arrangements in small towns and cities
D. Project components
30. support in the four cities under the responsibility o f FIPAG; (B) capacity building, institutional and operational support to DNA for AMU, PWBs, and SWAP; and, (C) operational support to C R A with respect to expanded regulatory responsibility for smaller towns and cities.
The project will finance the fol lowing three components: (A) investments and continuing
Component A: Investments and continuing support in Pemba, Nampula, Quelimane, and Beira, the 4 Cities under the responsibility of FIPAG (US$22 million)*. 3 1. from the construction o f approximately 370 kilometers’ o f network resulting in 10,000 new connections in the four cities. These investments will take advantage o f the increased production capacity achieved under NWDP I1 and improve service coverage in the four cities. Increased number o f consumers which contributes to improvements in operational perfonnance will also create improved business opportunities for the private sector operators, key players in the
Under component A, the project will support an improvement o f water supply access
For Component A US$ 15 mi l l ion i s sourced from the ACGF and U S $ 7 m from IDA. Global Partnership for Output Based Aid (GPOBA) i s expected to contribute up to US$ 6 mi l l ion to facilitate new
8
9
connections to lower income consumers wi th connection subsides. This i s expected to triple the number o f connections to about 30,000 for the four cities. Maputo i s also included under the GPOBA in addition to the four cities.
15
delegated management framework. The improved level o f essential water services will also promote productivity and market expansion within the cities.
32. Specifically, this component will: (a) expand and extend the networks and distribution through l imited investments in small works in Pemba, Nampula, Quelimane, and Beira, operated and managed by a private operator; (b) provide physical investments to improve the operational efficiency in the urban cities currently under the responsibility o f FIPAG; and (c) support follow- o n private operator contracts in the four cities to consolidate gains under NWDP II. Overall, support to FIPAG will include goods, works, and consultant services, consumables including electricity and fuel, and training (See Table 3).
Component B: Capacity building, institutional, and operational support to DNA (US$5.5 million) 33. Component B is divided into 2 sub-components- Component B1 and B2. Under Component B1, an Asset Management Unit (AMU) under DNA for small towns and cities wil l be piloted. The AMU i s modeled on the delegated management model in that i t will be empowered to manage assets, plan and oversee the execution o f investments, and engage third party operators in smaller cities and towns. The AMU will facilitate the creation o f Provincial Water Boards (PWBs) which will be responsible for managing the water assets o f the participating cities and towns at the provincial level. Bo th the AMU and the pi lot PWBs wil l be supported under the project with capacity building, institutional support, and operational costs. The AMU will be closely l inked with investment funding under the proposed M C C project and therefore wil l be piloted in the four Northern provinces. The pi lot provinces will be selected from Zambezia, Cab0 Delgado, Niassa and Nampula. Eventually i t i s expected that the model will be rol led out nationwide once the new institutions are wel l established.
34. This component will: (a) adapt the proven sustainable institutional and regulatory modalities for secondary cities under an Ah4U based on the delegated management model proven in the experience f rom FIPAG cities where FIPAG can act as mentor; (b) ensure that the appropriate regulatory, policy, and institutional framework wil l be developed and tested as the delegated management model i s scaled up v ia pi lot projects; (c) build the capacity o f the sector players, including DNA, district and local governments, municipalities, public and private sector, and small scale providers; (d) promote small scale private sector participation in service delivery; and (e) provide operational subsidies during the transition period to support O&M.
Specifically, sub-component B1 will establish and operationalize the AMU and PWBs.
35. sector. The-project will co-ordinate with other donors to provide capacity building and institutional support with respect to development o f the SWAP approach for rural areas - small piped and non-piped systems. The Afr ican Development Bank, among other donors, is supporting this effort substantially. The Bank's value added wil l be to provide support in preparing the medium-term expenditure framework to facilitate the implementation o f the sector pol icy and, to the extent possible, support the preparation o f common guidelines for al l future investments in the sector regardless o f the source o f financing.
36. Sub-component B 2 wil l provide for the implementation o f Sector Pol icy v ia support to the preparation o f the SWAP. This will: (a) provide resources to complement a donor-wide initiative led by DNA to develop a strategy to scale up the demand driven community participatory model for village piped systems and non-piped systems; and (b) complement, as necessary, measures already underway to mitigate the risks f rom HIV /A IDS in DNA (see Annex 14 for further
Component B2 will support DNA in the preparation o f the SWAP in the rural water sub-
16
elaboration o n DNA and FIPAG HIV /A IDS Policy). Overall support to DNA for Component B includes goods, technical assistance, training, and operational cost support for the AMU and PWBs. This breakdown i s further defined in Table 3.
Component C: Capacity building, institutional, and operational support to CRA (US$2.5 million) - 37. Under component C y the project will support the development o f regulatory fiameworks to cover the smaller towns and cities as the AMU i s set-up and expanded v ia the PWBs. The project will continue operating cost support to C R A as wel l as TA, and additional operating support at provincial level as the new regulatory models are rolled-out to meet the needs o f these new agencies. This component will: provide resources to complement CRA's expanding work on extending regulatory frameworks and oversight to smaller cities and towns. The project wil l provide goods operational support, capacity building and training, and technical assistance to C R A as set out in Table 3.
17
Components and Implementing Agencies Component A: FIPAG Water supply system investments
Design and Construction o f network for Pemba and Nampula Design and Construction o f network for Beira and Quelimane
Support to operational efficiency, operational management, and consumables
US% ('000) US% ('000)
17,000 6,800 10,200
2,500 Purchase o f vehicles Supply o f chemicals , consumables including fuel and utilities
Supply o f meters Supply o f equipment and spare parts
FIPAG - TA, Capacity building, training TA for Supervision o f works TA for construction management for FIPAG for 2 years TA for procurement and contract mgmt for FIPAG for 2 years
lo In alignment with the Mozambique Country Financing Parameters dated August 25,2004, taxes and duties (including VAT) wil l be included within the Credit and Grant funding.
18
200 1,200 600 500
2,500 1,500 350 225
E. Lessons learned and reflected in the project design
38. to donors and the lack o f attention to smaller cities and towns, i s in part a result o f the limited absorptive capacity o f DNA and i t s inability to process projects in an efficient manner. DNA will be supported under the project through capacity building and technical assistance specifically with respect to the creation o f the AMU and support o f the SWAP. Lessons from the support o f FIPAG in NWDP I1 showed that capacity building and maturing o f a new institutional framework can take a long time to develop. The creation o f a similar institution - AMU, and resulting regulatory arrangements wil l need an equally long time and strong capacity building and institutional support both from C R A and DNA.
Capacity building takes time. The fragmentation o f the sector, particularly with respect
39 NWDP 11 project was the strong commitment to the sector reforms and DMF. The NWDP I and I1 projects were inherently r isky and complicated as they were predicated o n untried reforms, including the use o f the private sector in a high profi le public service - water supply. The reform agenda was owned by the G o M and was strongly backed by the sector ministry. This support was tested in the early r o l l out o f the DMF when the main private operator changed international partners. However the ultimate success o f the pol icy is witness to the GoM's steadfast commitment. Continued strong commitment to the sector reforms i s expected to ensure the success o f WASIS.
There is no substitute for strong government commitment. The key to the success o f the
40. the sector have generally under-spent. Whi le in part this has to do with capacity o f sector institutions, there have also been payment difficulties with respect to VAT which i s 17 percent o f al l contracts. These payment difficulties have been experienced by FIPAG with respect to c iv i l works projects. As set out in the Country Financing Parameters (August 25,2004), the new Credit will allow for disbursements to cover taxes and duties, including value added tax (VAT) on works and goods, and consultation services".
Includingpayments of VAT in the funding arrangements. The donor-funded projects in
41. accelerate water coverage in Mozambique, development must occur in a coordinated way. This program has taken this into consideration by helping to accelerate the programmatic sector approach. Opportunities will be identified during implementation to continue to scale up. There are also financing gaps, identified by the government that remains if the MDGs are to be met. The identification o f other sources o f financing to help the G o M meet its financing gap and how these funds should be phased into implementation o f the broader PARPA water sector program are important to achieving program results.
Coordinated support tof i l l f inancing gaps to meet the water MDG. To scale up and
Alternatives considered and reasons for rejection
42. significant changes to the institutional or regulatory arrangements for the proposed investments. The new investments are extensions based on the production capacity developed under the NWDP I1 and will consolidate gains made under that current project. The new project will strengthen the delegated management framework by supporting new private sector arrangements
Choice of a repeater over a new project. A new project would be required if there were
l1 Usually, taxes and duties are covered by counterpart finds. In the WASIS Project, taxes and duties are below the counterpart funding o f $3 mi l l ion or 10% o f project cost.
19
for the four cities v ia expected lease contracts. An increase in the number o f consumers connected can result in increased revenue generation and more financially sustainable systems. The consolidation o f gains through the repeater project will also help secure the strategy o f delegated management as a pol icy to be rolled-out to smaller cities and towns.
43. However, this would require that additional activities be completed within three years o f the current closing date. Completion o f the works and roll-out o f the extensions to the systems being proposed would not be feasible within a 3-year time frame. There are no project cost savings f rom the current project to undertake the proposed activities.
Supplementary Pnancing. An alternative could be the use o f supplementary financing.
111. IMPLEMENTATION
A. Partnership arrangements
44. WASIS i s 50 percent funded by the ACGF grant and 50 percent by an IDA credit. The project is designed to work closely with and complement the MCC's investment in small towns and cities in the north o f Mozambique. The preparation work o f the M C C i s expected to be completed in June 2007 with M C C funds available in late this year. In addition, the Global Partnership for Output-based-aid (GPOBA) i s contributing up to US$10 mi l l ion to provide connection subsidies to l o w income areas in the five cities o f Maputo, Quelimane, Beira, Pemba and Nampula. The grant contribution from GPOBA would provide the cities covered under WASIS with an additional 20,000 connections. With respect to the support to establish a rural water sub-sector SWAP, the project will coordinate closely with the other active donors through the sector working group.
B. Institutional and implementation arrangements
45. Given the repeater status o f the project, the implementation agencies for financial management and procurement remain the same as in NWDP 11. Component A will be implemented by FIPAG and i t will administer two designated accounts for processing o f Credit and Grant funds. Components B and C will be implemented by C R A with regard to procurement and financial management aspects. There will be one designated account that wil l be administered by C R A for both components. Technical matters with respect to drafting o f terms o f reference, review o f documents prepared under Component B, and quality control wil l be the responsibility o f and supervised by DNA. In establishing the AMU and the PWBs, municipalities and the provincial governments wil l be consulted to ensure a smooth transition in creating the asset holding institutions.
C. Monitoring and evaluation of outcomes/results
46. FIPAG and C R A will each report quarterly to IDA via the Quarterly Financial Management Reports (FMR). These reports will cover three main areas and include: progress o n the outcome indicators, progress o f procurement, and review o f financial management aspects (see Annex 6 for further elaboration). IDA, in tandem with the clients, will undertake six monthly reviews to report o n progress. Specific processes and indicators for Components A and B are discussed below.
20
47. Component A: The reporting requirements for the technical outputs for WASIS will be the responsibility o f FIPAG. The outputs will be measured by a set o f performance indicators which form a sub-set o f the present indicators reported under NWDP 11. These wil l build on the extensive data base already established by FIPAG and monitor the progress o f the network expansion and service connections as we l l as other important indicators. The total set o f indicators will be set out in the contract with the private operators for the four cities. These indicators will include, but wil l not be l imited to, the following:
Indicator Production Reliability o f service Water Quality
No. o f km o f network No. o f connections Bill collection ratio
Unit Cubic meters quarterly Hours per day No. o f tests for residual chlorine in distribution system not meeting agreed standards. Km N e w connections per quarter %
48. the operator and submitted to the client. Progress will be assessed against the target indicators and corrective action taken, as appropriate, to ensure that the project goals are achieved. At the end o f each year, annual performance will be reported to and assessed by FIPAG. Reporting o f the indictors will be included in the quarterly FMRs to IDA.
A s i s usual in private sector contracts for operations, monthly reports will be prepared by
49. Components B and C. The output indicators will be the responsibility o f both DNA and CRA. Implementation o f the proposed institutional reform and introduction o f the delegated management framework for operation o f non-FIPAG urban water supply services would be kept o n track and monitored by establishing a work plan for completing key activities. Annex 3 sets out the arrangements for results monitoring and lists the key activities and a timeframe o f completion by project years. The AMU would be expected to establish and maintain a detailed rol l ing 12-month work plan for implementing the key activities under i t s mandate and submit a br ie f report on progress and an updated work plan to the Director o f DNA every three months. DNA would also be required to report o n the progress o f the SWAp. Reports o f the Joint Sector Review, bi-annually, should be included in the FMR under progress on outcome indicators.
50. components and report quarterly on progress in the FMR. CRA's outcome indicators by year of the project are also set out in Annex 3 and progress o n these indictors will be reported quarterly in the FMR. Note that C R A will be fully responsible for the procurement and financial management aspects o f the FMRs.
Likewise, C R A would be expected to maintain a work plan for implementation o f i t s
5 1. results achieved through the SWAp. Through coordination with MCC, the Bank will continue regular dialogue on progress in Mozambique and opportunities to accelerate this progress.
Monitoring and evaluation o f the PARPA will provide information on the broader sector
D. Sustainability
52. The G o M has shown strong commitment to the reforms in the water sector and there i s continued momentum and drive by the major institutions in the sector to deepen the reform processes by building on NWDP 11's lessons and positive performance. One o f the main goals
21
underpinning the successful pol icy o f the delegated management framework i s to improve the financial viability and efficiency o f the service providers in the urban and town water sector. Achieving long-term financial sustainability entails reducing the dependence on government subsidies and increasing reliance o n tar i f fs f i om the customers as the main source o f internally generated financing. Through this process, the service providers are expected to gain financial autonomy to tap other sources o f funding from international and domestic financiers and the capital markets. Overall, the sustainability o f the project i s grounded in the Government's strong ownership o f the reforms.
53. The proposed project envisages supporting the G o M in attaining this long-term financial goal for the urban and town water sector by: (i) providing funds to FIPAG for its investments in the four Northern cities that lead to expanded customer base and increased revenue; (ii) providing institutional, technical, and short-term O&M support to AMU, the new asset holding company that would be established to serve the smaller towns until i t i s able to cover its O&M costs through user tariffs; and (iii) supporting CRA to expand i ts areas for regulation to include the AMU towns.
E. Critical risks and possible controversial aspects
Table $ Potential Risks Second generation o f private sector contracts for the four cities i s delayed.
Government's capacity to carry out reforms for small cities and towns i s uncertain
Sustainability o f the DMF with respect to smaller cities and towns fails due to lack o f capacity or interest o f local private sector
M C C does not follow through with i t s commitment to fund investments in water sector or funding i s significantly scaled back from the original estimate provided
Potential risks and risk mitigation measures Risk Mitigation Measures The preparation o f bidding documents for the next set o f private sector contracts for the four cities has been advanced under NWDP 11. The extension o f the current management contracts i s possible until September 2007. Requests for expression o f interest for the new contracts are ready for publication in Development Business. Reforms have been successfully camed out in large urban centers wi th good results. This track record can be applied to smaller cities and towns. A technical assistance component w i l l support DNA to manage the process and build capacity to enable them to be in the driver's seat for reform and implementation o f sector policy. The creation o f the AMU and the Provincial Water Boards to oversee the operations o f the smaller cities and towns are undertaken as pi lot projects as this model i s untried at provincial level. Experience and direct support from FIPAG will be provided to mitigate the risk, as well as TA and operational support provided in the Credit and other donors. When the SWAP mechanism i s in place, it w i l l be able to funnel resources to water development in rural areas. However, the coverage would grow at a slower rate and MDGs for water and sanitation might not be met on target. The Bank will continue to look for alternative financing mechanisms to help the government meet its financing needs.
Average Risk
Risk Rating L o w
Medium
High
Medium
Medium
22
F. Credit conditions and covenants
54. e
e
e
e
55. e
e
e
56. e
e
e
e
e
e
Effectiveness conditions: Satisfactory legal opinions on the Financing Agreement, Project Agreements and Subsidiary Agreements are made available.
o Subsidiary agreements between G o M and the Implementing agencies include: . . . On-lending arrangements between FIPAG and G o M Pass through grant agreements between C R A and G o M Statement o f roles and responsibilities between C R A and DNA with respect to procurement and financial management procedures.
FIPAG and C R A have caused that the existing financial management systems be adjusted for the purposes o f the Project, satisfactory to the Association in form and substance. FIPAG and C R A have each adopted the relevant Project Procurement Manual adjusted for the purposes o f the Project, satisfactory to the Association in form and substance. The execution and delivery o f the Afr ican Catalytic Growth Fund Agreement has been duly authorized.
Effectiveness conditions for the ACGF Grant: Satisfactory legal opinions on the Grant Agreement, Project Agreement with FIPAG, and the Subsidiary Agreement between FIPAG and GoM. The latter indicates funds are passed through as a grant. FIPAG and C R A have caused that the existing financial management systems be adjusted for the purposes o f the Project, satisfactory to the Association in form and substance. FIPAG and C R A have each adopted the relevant Project Procurement Manual adjusted for the purposes o f the Project, satisfactory to the Association in form and substance.
Financial and Other Covenants: During the 12 month after the Mid-Term Review, the financing gap in the operational cost support to the Asset Management Unit in the years 2013-2015 wil l be quantified and the G o M wil l make provisions to cover these costs. Within twelve months o f the Effective Date o f the Project, the AMU shall be established by decree The C R A and FIPAG will maintain financial management systems in accordance with international accounting standards, and have their entity financial statements and project financial statements audited in accordance with international auditing standards. These audits shall cover the period o f one Fiscal Year. The audits for each such period shall be furnished to the Association not later than six months after the end o f such period. The tariffs for the systems under the responsibility o f FPAG shall reflect the principles o f full cost recovery and be sufficient to cover operating expenses, depreciation, and cost o f capital in a reasonable time horizon for al l said systems. The tariffs will be assessed during the Mid-Term Review Within eighteen months after the Effective Date, a l l outstanding public sector arrears to FIPAG are settled and ensure that a mechanism to pay future public sector water bi l ls be put in place. FIPAG shall ensure that it: (i) covers 1.2 times its debt services requirements through i t s net revenues; and (ii) does not incur any additional debt unless a reasonable forecast o f i t s revenues and expenditures show that i t s projected net revenues for each Fiscal Year during the term o f the debt to be incurred shall be at least 1.5 times the projected debt service requirements.
23
IV. APPRAISAL SUMMARY
A. Economic and Financial Analyses
Economic Analysis (see Annex 9)
57. The WASIS Project i s a repeater to the NWDP I1 that aimed to increase the safe water production capacity o f f ive biggest towns o f Mozambique and to support a robust institutional structure in the water sector. WASIS proposes to: (1) create the networks that deliver the new production capacity to consumers; and (2) increase institutional capacity to implement a smaller cities and towns framework. A total o f US$30 million, equally contributed by IDA and ACGF i s earmarked for this project. O f the total, US$22 mi l l ion i s allocated for building distribution networks (Component A) and the rest to Components B & C. For the purposes o f economic analysis, there are many non-easily quantifiable benefits to Components B & C associated with capacity building and creating new institutional structure. Therefore, for the purposes o f this analysis, only Component A will be analyzed in detail.
58. A cost-benefit analysis using a ‘with and without project’ methodology has been used to calculate the EIRR and NPV o f Component A o f the project to which the project directly contributes with physical investments. The incremental economic benefits are projected over a 15 year period to arrive at the EIRR and NPV based on a 10% (the hurdle rate IDA uses in WSS projects) discount rate. This methodology projects how behavior o f beneficiaries wil l change fol lowing the project intervention in the ‘with project’ scenario. In the ‘without project’ scenario, the current situation is assumed to continue into the future.
59. project towns - Beira, Nampula, Pemba, and Quelimane - which provides opportunities for new consumers to connect to the network. Conservative estimates suggest that 10,000 new consumers will j o i n the formal network fol lowing project implementation, with 80% o f the connections occurring in the latter ha l f o f project implementation after the pipelines are laid. The 10,000 new connections are expected to be in the form o f individual yard taps, which wil l add approximately 53,000 new consumers to the AdeM’s formal network (assuming an average household size o f 5.3).
For Component A, new networks that stretch up to 370 K m s wil l be installed in four
60. neighbor’s yardtap, public standposts, and wellshandpumps. The economic benefits from the new connections wil l mean that households previously dependent o n neighbor’s yard-tap, public standpipes or wells wil l move towards accessing water from a formal connection. The economic analysis quantifies the benefits accruing to the project beneficiaries - the newly connected households. The benefits can be quantified in the form o f incremental expenditure o n meeting the household water demand, and time savings as a result o f lower collection and wait time. Based on the beneficiary assessment carried out in 2003 for the NWDPII, the proportion of households in each city dependent o n each o f these sources is used to calculate their current expenditure o n water supply. Those dependent on wells do not pay while those dependent o n a neighbor’s tap pay a higher than formal network tariff. The incremental water expenditure from the new connections wil l be minimal since households relying on neighbor’s tap are paying more, and households relying o n public standpipes and handpumps/wells are paying much less for a 20L bucket than their ‘post project’ scenario o f a yardtap connection. The expenditure o n
The primary water sources for households not connected to the AdeM’s network are
24
water for the newly connected consumers i s valued based o n the average tar i f f for individual connections/yard taps which ranges from US$0.45/m3 in Nampula to US$0.5 l/m3 in Beira.
Beira Nampula Pemba Neighbor’s tap 9 21 26 Public Standpost 35 28 17 Wells/Handpumps 31 30 48
Source: Beneficiary Assessment for NWDP 11,2003; WB-FIPAG Financial Model
Quelimane 44 79 78
61. incur time savings that can be quantified by valuing the time in the form o f wages lost due to the water collection activity. The economic benefits f rom the new connections primarily derive from these time savings. For instance, in Quelimane, an average household spends approximately four hours a day collecting water at the public standpost. At the public standpost and wells, the waiting, filling and carrying time for a 20L bucket can range between 17 minutes in Pemba to 79 minutes in Quelimane. In comparison, the water collection time i s 10 minutes at the yard tap for a 20L bucket. The time savings are valued at 50% o f basic industrial wage of 1443 M t d m o n t h to account for unemployment and l o w opportunity cost o f time. The economic benefits f rom new connections primarily derive f rom time savings since household members particularly women and children spend a significant amount o f time daily in water collection.
Accessing water f rom yardtaps and private standpipes also means that households wil l
62. The economic analysis suggests that Component A o f the project has a positive economic NPV o f US$51 mi l l ion and an EIRR o f 60%. This implies that the project will be beneficial to the citizens o f the four cities o f Beira, Nampula, Pemba, and Quelimane in alleviating their water supply concerns.
25
Financial Analysis (see Annex 9) 63. T o assess the likelihood o f achieving the sector’s financial goals, an analysis has been carried out o n the main service provider FIPAG. FIPAG would implement the majority of the project and its investments. An analysis has also been carried out for the AMU. The AMU and the related P W s benefit from institutional and operational support under the Credit and are designed as pilots. There i s no investment provided for works under the credit for the AMU.
64. performance has been improving. As it has taken o n the responsibility o f serving additional cities and towns over time, i t s revenue base has grown. The delegated management model implemented in Maputo, Beira, Nampula, Quelimane, and Pemba has contributed to operational efficiencies and general improvements in the service. The financial projections indicate that FIPAG’s consolidated net income in 2007 is expected to break even, and continue to improve thereafter. The timely implementation o f the investments in network extension and new connections planned under the project would help FIPAG achieve full cost recovery, including the future debt service payments that will increase in the next four to five years. In addition to meeting the US$7 mi l l ion debt service obligations for IDA, FIPAG’s financial projections demonstrate that the debt service coverage ratio, one o f the key financial covenants, wil l continue to remain above 1.2 for the next 15 years.
Financial Analysis of FIPAG. Since i t s establishment in 1998, FIPAG’s overall financial
65. are realized: (i) timely tar i f f adjustments by CRA according to the principle o f full cost recovery; (ii) timely network extensions and sufficient demand that lead to planned new connections materializing; (iii) continued improvements in commercial and operational efficiencies including reduction in non-revenue water; and (iv) timely payment o f the lease fees from the private operators. The main assumptions for the model are summarized in Annex 9.
FIPAG’s financial sustainability can be achieved if the fol lowing main key assumptions
66. investments in i t s 14 towns, i t faces a challenge in maintaining its financial sustainability. Even if more than two thirds o f FIPAG’s capital investments are funded by grants, careful analysis i s required to assess the impact on FIPAG’s operational expansion because FIPAG’s track record and experience show that significant time, technical assistance, and management sk i l ls are required to turn around the utilities to improve their efficiency and cost recovery ratios.
As FIPAG expands i t s operations at a very fast rate, attracting over US$350 mi l l ion in
67. to run the systems in the small towns, a financial analysis has been carried out o n the viability o f the municipalities and small towns that are expected to be part o f the pi lot in the Northern provinces, including Nacala, Lichinga, Gurue, Angoche, Cuamba, Mocuba, and I lha de Mozambique. Based o n the projections (details are attached in Annex 9), the net cash deficits for the seven large piped systems in the municipalities for the period 2009-2012 would total about US$2.2 mi l l ion over the next seven years. The required annual tariff increase would be the rate o f expected inflation (1 0 percent). Assuming that the growth and operational improvements wil l fol low the similar pattern as the FIPAG towns, al l AMU towns are expected to reach the break- even point in 2015. Adding the ten additional small piped systems, the total operational support required i s expected to be about US$3 mil l ion. These operational deficit figures, however, are
Financial Analysis of the AMU. To assess the l ikely operational support that is required
26
notional as there were very little reliable data available for the AMU towns at the time o f appraisal. Therefore, during the mid-term review, the l ikely financial gap in the operational cost support to the AMU and PWBs will be reviewed, and a mechanism will be put in place for GOM to make provisions to cover these costs beyond the project period. I t i s expected that significantly longer time would be required for these towns to reach fill cost recovery, including the administrative and operational costs o f AMU and the PWBs.
B. Technical
68. FIPAG is the asset holder and retains the responsibility for water supply in the four project cities, Beira, Nampula, Quelimane and Pemba, as wel l as ten other cities including Maputo. The four cities are operated under a Management Contract with AdeM, a private operator. The majority o f the investments made during the NWDP I1 project (2000-2007) have focused on restoring and augmenting supply capacity. This has resulted in a series o f service improvements for the cities. The current performance o f the cities as wel l as supporting information i s set out in Table 9 set out below.
69. Quelimane and Pemba. This is to take advantage o f the additional water available as a result o f the upgrading o f the sources o f supply under NWDP 11. This wil l be expected to facilitate about 10,000 new connections and provide for around 53,000 new consumers. The level o f service wil l be mostly yard taps. The areas chosen for the new extensions are as follows:
WASIS provides for investments in the extension o f the networks in Beira, Nampula,
0
Pemba: Ingonane, Natite, Maringanha. 0
0
Beira-Dondo: Macurungo West, Manga, Inhamizua.
Quelimane: Janeiro and Torrone Novo, 17 de Setembro, Sangariveira, 3 de Fevereiro. Namuula: Muahivire Expansilo, Muatala and Mutananha, Namicopo, Namutequeliua, Bamboo in Netikiri, Muhala Expansilo.
l2 The Source document for the data i s the KPI report for the four cities Management Contract, November 2006 l3 Quelimane additional source commissioned in November 2006 so continuity w i l l r i se to 24 hours/day. Beira rehabilitation o f Water Treatment Works due to be commissioned in July 2007, and continuity will r i se to 24 hourslday.
27
Table 10: Estimated networks and connections in four cities Location
Total length o f new network (km)
Beira Pemba Quelimane Nampula Total
132 80 74 84 370 14Estimate o f possible new connections
Estimated potential population served
Estimated Cost (US$ Mil l ion)
(No.)
(No.)
C. Fiduciary
3000 2250 2250 2500 10,000
15900 11925 1 1925 13250 53,000
5.50 3.10 4.40 4.00 17.00
70. arrangements in place for fiduciary matters (procurement and financial management). The financial units o f FIPAG and C R A will be responsible for handling financial management matters o f the project. Bo th institutions have experience in managing Bank-financed operations. The accounting personnel handling financial management matters o f the on-going Bank- financed project will also responsible for financial operations o f the proposed project.
The project wil l make use o f the institutional framework o f FIPAG and CRA, as well as
71. accounting systems, policies and procedures to be employed. The manuals describe the accounting system, internal control procedures, basis o f accounting, standards to be followed, authorization procedures, financial reporting process, budgeting procedures, financial forecasting procedures, and contract management. In addition, the manuals document procedures to be undertaken for the replenishment o f the Designated Accounts and auditing arrangements.
Both implementing agencies have Financial Procedures Manuals that document the
72. called “Primavera”. This accounting package has proved to be adequate as FIPAG and C R A are able to produce necessary reports required to manage and monitor their financial operations. The chart o f accounts at both entities will be adjusted to be able to identi fy project activities and disbursement categories. This wil l be condition o f effectiveness.
FIPAG and C R A accounting systems are based on conventional accounting software
73. with International Standards o n Auditing as promulgated by the International Federation o f Accountants (IFAC) and the audit report wil l be submitted to IDA within six months o f the financial year-end. The costs incurred for the audit will be borne by the project funded by IDA. Currently, the latest audited financial statements were the 2006 audits and these were received by June 30,2007. Therefore, there are no outstanding audit reports for either implementing agencies.
The project financial statements will be audited by independent auditors in accordance
74. financial management arrangements have an overall rating o f modest risk which satisfies the Bank’s minimum requirements under OP/BP 10.02 (see Annex 7 for further elaboration).
The overall conclusion o f the financial management assessment i s that the project’s
l4 Estimate o f new connections i s conservative based on past practice. If GPOBA funding for connections becomes available, the number o f new connections could double.
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D. Social: Stakeholders consultation
75. Quelimane, and Pemba met with senior managers and engineers f rom FIPAG immediately before pre-appraisal in February 2007. At each meeting the FIPAG representatives described the proposed WASIS Project for water network expansions to facilitate household connections and the complimentary GPOBA funded project for providing connection subsidies to l o w and medium income households. The municipal representatives were then asked to recommend community areas where network expansion would facilitate new household connections for l o w and medium income households. After some discussion and deliberation, several locations were then proposed by the Municipality representatives. The FIPAG team then visited each suggested location and had further discussions with community representatives. FIPAG assessed the technical, socio-economic and environmental viabi l i ty o f the suggested sites. Suitable areas were then selected and conceptual engineering designs for each network relative to consumer coverage and interest was then used to determine notional pipe work lengths and sizes, which resulted in the estimation o f an indicative project cost.
The Municipal and Community Representatives f rom the four cities o f Beira, Nampula,
E. Environment
76. Through extending piped water distribution in Pemba, Nampula, Quelimane and Beira, and through supporting the development o f regulatory frameworks to cover piped water supply in the smaller towns, the project wil l reduce environmental health r isks from contaminated water and enhance institutional arrangements for environmentally sustainable growth.
77. improving urban sanitation i s an important objective in Mozambique. Though the G o M has clearly given water supply (and education and health) a higher priori ty than sanitation, DNA completed a Strategic Sanitation Plan (SSP) in 2004 with funding from NWDP I. The SSP covers Maputo, Matola, Beira, Dondo, Nampula, Pemba and Quelimane, and provides complementary sanitation developments over a 15-year planning horizon in three phases with short, medium and long-term implementation projects. I t encompasses storm water drainage, and wastewater and solid waste management, and considers infrastructural, institutional, financial and economic aspects. Some initiatives to implement the SSP have been taken. For example, the EU is implementing a US$27 mi l l ion sanitation project in Beira, and is making sanitation investments in Maputo. The M C C i s planning significant sanitation investments in Quelimane, Pemba, Nampula and seven other larger municipalities. Nonetheless, there remains a considerable sanitation challenge in the country, especially in paying for the recurrent costs o f services. With the WASIS Project, the Bank continues i t s engagement with the water sector in Mozambique, and especially with DNA, where opportunities were explored for contributing its extensive country and sector experience to ongoing and future initiatives to effectively address sanitation issues.
The incidence o f water borne diseases such as cholera and diarrhea, indicates that
29
F. Safeguard policies
Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP 4.01) [ XI [ I Natural Habitats (OPBP 4.04) [ I [XI Pest Management (OP 4.09) [ I [XI Physical Cultural Resources (OP/BP 4.1 1) [ I [XI Involuntary Resettlement (OPBP 4.12) XI [ I Indigenous Peoples (OPBP 4.10) [ I [XI Forests (OP/BP 4.36) [ I [XI Safety o f Dams (OPBP 4.37) [ I [XI Projects in Disputed Areas (OP/BP 7.60)* [ I [XI Projects on International Waterways (OP/BP 7.50) [I [XI
78. environmental impacts and, perhaps, some land acquisition or compensation for losses and damages to property. These safeguard concerns w i l l be readily managed by implementing FIPAGs Environmental Management System (EMS) and the Resettlement Policy Framework (RPF) prepared for the project. FIPAG has a well-developed capacity, and demonstrated commitment and track record, for employing these instruments to avoid or minimize adverse safeguards issues.
The WASIS Project i s an EA Category B project since there may be minor construction
79. Final design o f the network extensions w i l l consider alternative alignments to avoid or minimize adverse environmental and social impacts. The likelihood o f large scale, significant, cumulative and/or irreversible impacts i s considered to be nil.
80. Key stakeholders are the municipal authorities, and neighborhood leaders and residents, where the network extensions will be constructed. The former were consulted in preparing the RPF. The EMS and RPF were disclosed through the Infoshop and through FIPAG offices. Final design o f the extensions, the construction plan and schedule, and, as needed, specific Environmental Management Plans and Resettlement Action Plans (RAPS) will be discussed and agreed with stakeholders before they are finalized. RAPS w i l l be implemented before construction begins (see Annex 10 for further elaboration).
G. Policy Exceptions and Readiness
81. WASIS does not require any exceptions from Bank’s policy. The ESMF and RPF were disclosed on April 2,2007 in-country and April 2,2007 in Infoshop. The Procurement plan for the f irst year’s activities i s complete and ready for the start of project implementation.
0
* By supporting theproposedproject, the Bank does not intend to prejudice thefinal determination of the parties’ claims on the disputed areas
30
Annex 1: Country and Sector or Program Background
MOZAMBIQUE: Water Services and Institutional Support Project
I. Growth, poverty reduction, and role of eflcient service delivery
1. Mozambique, a country o f 19 mi l l ion people with more than 70 percent o f the population i s rural areas, i s located in the southern tip o f the Afr-ican continent. Coming out o f a devastating three-decade c i v i l war in 1992, Mozambique grew rapidly and i t s growth rate has stabilized around 7-8 percent since 2000. Concurrent with growth, Mozambique also succeeded in containing poverty and enhancing access to social services, though 29 percent o f i t s population l ived below U S $ l a day (PPP terms) in 2002. Headcount ratio reduced by 15 percentage points from 69 to 54 percent and poverty gap reduced by 29.3 percent to 20.5 percent during 1995 to 2005. Mozambique is comfortably placed among its neighbors, while South Africa, Tanzania, Uganda show lower poverty rates, Zambia and Malawi have experienced higher poverty rates.
Sub-Saharan Afr ica 29.20 I 31.92 I 34.27 Source: World Development Indicators, The World Bank
2. percent allowing for 1 percent reduction due to the effect o f HIV/AIDS. Though it is higher than the regional average, i t i s s t i l l lower than the 8 percent growth that Mozambique has experienced
The Country Economic Memorandum (CEM, 2005) predicts a long-term growth of 5
31
in the past decade. Structural reforms currently underway are aimed to contain growth at these levels, as factors that led to the expansion in post-war economic activity such as agriculture sector growth and donor assistance are showing a declining trend. Mozambique received 12-15 percent o f GDP in concessional assistance from the donors after the war that covered 50 percent o f the Government budget (CEM). In addition, the H IV /A IDS epidemic and a probable recurrence o f natural disasters can adversely affect Mozambique’s growth potential (CAS Progress Report, 2005).
Figure A1 -1 : Movement o f economic variables
Mozambique - Movement of Economic Variables
50 1 40 -
a
30 -
20 - a
A
1990 1991 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
-2 0
+Agriculture, value added (77 of GDP) GDP growth (annual %) Official development assistance and official aid (current US$)
Source: World Development Indicators, The World Bank
3. that poverty reduction in Mozambique was equitable, with al l groups including the bottom quintile o f population, benefiting from economic growth. Though poverty s t i l l remains a rural phenomenon (population i s st i l l overwhelmingly rural), this reduction was unique because rural poverty fe l l faster than urban poverty (CEM, 2005). Further, there has been a convergence in inequality through reduction in regional disparities. However, 10 mi l l ion Mozambicans st i l l l ive in absolute poverty (PARPA 11).
At 3.9 percent, the rate o f pro-poor growth in the past decade was positive which implies
II, Meeting the MDGs in Water Supply
4. In spite o f achieving a number o f i t s growth and welfare goals, efficient public service delivery remains a challenge. For instance, in water supply and sanitation (WSS), Mozambique i s among the 24 least developed countries that need to double its 1990-2004 rate o f increase to reach the MDG target by 2015. I t i s also one o f the few countries where urban service coverage from improved sources i s declining - there has been an 11 percentage point decline in urban service coverage during 1990-2004. I t can be due to an increase in urban population which grew from 2 1 to 32 percent since 1990 (World Population Prospects, 2006).
32
5. make safe water available to i ts citizens. One o f the pillars o f Country Assistance Strategy (CAS, 2003) for Mozambique to enhance overall well-being o f i t s citizens i s expanding service delivery that includes sustainable access to safe water sources. The explicit indicator in urban water supply specified the improvement in access and service quality in five major towns o f Mozambique. According to the CAS Progress Report (2005), access to water supply improved significantly during 1996-2002 to 2003-2005 - from 24 percent to 42 percent. In the PRSC 2005, the G o M clearly outlines enhancing service delivery in rural water supply and sanitation as one o f the three pillars to achieve growth and development. In water supply, the PES goal was to achieve 41 percent coverage, and the actual coverage was 39.8 percent during this period. The PARPA I1 (2006-2009) aims to ensure broad-based growth and reduce poverty from 54 to 45 percent in 2009 through the human capital pillar that focuses o n efficient public service delivery.
The G o M has taken active measures in i t s CAS and PRSC to meet this challenge and
6. Mozambique i s o n track to achieve the millennium development goal (MDG) related to water supply that aims to reduce the number o f people without sustainable access to safe water supply and sanitation by ha l f in 2015. Service delivery in urban water supply has improved in the Mozambican cities through rehabilitation and improved operational efficiency and MDG targets o f 70 percent coverage in urban water supply can be potentially met (CAS Progress Report, 2005). Water access i s recorded at 37 percent which i s less even by SSA standards of 58 percent (CEM, 2005). Rural access at 27 percent i s lower than SSA rural access at 46.5 percent.
7. Between 1996/97 to 2002/2003, the access to improved water sources improved from 12 to 27 percent in rural areas and 54 to 64 percent in urban areas (CEM, 2005). The C E M clearly outlines the role o f water in poverty reduction and exhorts the improvement o f regulatory framework for natural resources as a critical input to growth and poverty agenda for Mozambique. PER 2003 reports that rural access i s left behind compared to urban access and the figures are misleading and rural access i s lower and urban access i s higher than originally envisaged. The system o f delegated management, with the management o f 5 cities in the hands o f the private operator, has resulted in increase in connections and quality o f supply. CEM 2005 has cited these improvements as an example o f Mozambique’s ability to undertake far-reaching and often painful reforms. These improvements have also had a leveraging effect with additional private and donor funding pouring into the sector, C E M 2005 recommended expanding standpipe access in urban areas, licensing privately funded water kiosks, increase co-payment in urban areas.
8. o f 40 percent in the rural areas and 38 percent in the urban areas. The GoM’s numbers are derived from number o f boreholes dug and number o f households using an average borehole (adjusting for breakdowns in the boreholes). Meeting the M D G s means urban access increasing to 78 percent and rural access increasing to 56 percent.
However, the figures on access are controversial. The G o M uses the water access figures
33
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
MOZAMBIQUE: Water Services and Institutional Support Project
Completed Projects - Activities Support to Capacity Bui lding for DNA, Water Resources, Rural water supply and support to the development o f the Delegated Management Framework On-going Projects - Activities Support to 5 cities - Maputo, Beira, Nampula, Quelimane, and Pemba under the delegated management framework (using private sector contracts) managed by FIPAG to improve water supply systems . Significant investment _ _ . .
on production and supplyfacilities. Support to 4 cities - Chokwe, XaiXai, Inhambane,and Maxixe under the delegated management framework managed by FIPAG to improve water supply service levels Support for Maputo upgrade production facilities and improve and expand distribution systems and expand networks under FIPAG Support for the 5 Western Cities - support for operations and capital works in Manica, Chmoio, Gondola, Tete, and Moatize under FIPAG
Project (NWDP I) satisfactory World Bank, NDF, Canada, Swiss
Second National Water Development Project (NWDP II) World Bank, African Development Bank, Government o f the Netherlands
Four cities Project - African Development Bank, Government o f the Netherlands
Maputo Water Supply Project European Investment Bank, EU Water Fund, ADF.
Government o f the Netherlands
34
Annex 3: Results Framework and Monitoring
MOZAMBIQUE: Water Services and Institutional Support Project
on towards attainment o f MDGs for water and sanitation in the four northern provinces o f Zambezia, Niassa, Cab0 delgado, Nampula (including the three major cities o f Nampula, Quelimane and Pemba).
Increased access to water in the cities o f Beira, Nampula, Quelimane, and Pemba cites under the delegated management framework and establishment o f an institutional and regulatory framework for smaller cities and towns.
Component A: Networks constructed in each o f the 4 towns, Beira, Nampula, Quelimane and Pemba
Component B: AMU empowered to manage assets, plan and oversee the execution o f investments, and engage third party operators in smaller cities and towns
Common guidelines used for al l future sector investments, irrespective o f financing source
Component C: CRA's capacity to implement DMF expanded to smaller towns and cities.
ts with MCC Results Frar
Increased access o f served urban population to 52% and increased access of served rural population to 33% in the four northern provinces by 2012.
Other donor support triggered to increase urban and rural coveraee
10,000 households connected
2 Pilot Provincial Water Boards have capacity to manage service operator contracts Intermediate Outcome
Indicators 370 km o f new water supply network la id and operational
AMU has deconcentrated the management o f provincial water supply to local private operators
SWAP monitored annually via Joint Review
0 legal decree established for regulation o f smal l cities and towns
0 CRA's provincial representation operationalized (staffing plans developed and implemented, processes and systems in place)
:work
To measure increased coverage toward meeting MDGs
coverage towards meeting MDGs
Use of Intermediate Outcome Monitoring Monitor continued progress o f DMF in the 4 cities
Impact on productivity and market expansion on 4 cities
Monitor DMF for smaller towns and cities U s e information on pilot PWBs to scale-up
Track investments and sector lending
Monitor success o f CRA with respect to indirect regulation
Expand capacity o f CRA to carry out indirect regulation at provincial level with PWBs.
35
0 0 /I N 0 [I m
3 - * 3 m 8
0
IH r4 e m
0 0 0 m -
* u a2
&
.- El [I N m
0 0 2 0
[I m 0 0 0 0 0
0 0 0 0
In addition to the indicators measured for WASIS results monitoring, the following output indicators wil l be periodically reported under the reporting requirements by FIPAG. These indicators will also be used for ACGF technical output monitoring.
Indicator Production Hours o f service Water Quality
No. o f km o f network No. o f connections Bill collection ratio
Unit Cubic meters quarterly Hours per day No. o f tests for residual chlorine in distribution system not meeting agreed standards. Km New connections per quarter %
37
Annex 4: Detailed Project Description
MOZAMBIQUE: Water Services and Institutional Support Project
Component A: Investments and support in 4 Cities under the responsibility of FIPAG (US$ 22 million with the ACGF) 1. Background and organization ofFIPAG: The National Water Pol icy (1995) set the stage for a significant reform o f the urban water sector that has resulted in positive results through the implementation o f a pol icy o f delegated management. The legal establishment o f FIPAG (the asset holding company) and CRA (the regulatory authority) at the end o f the 1998 provided the basis for remarkable progress. FPAG has grown into an organization employing 43 staff overseeing a capital investment portfolio o f over US$350 million. The number o f schemes under its responsibility has grown from the original 5 to 13. Water services in the cities under FIPAG's control have been expanded and in most cities service quality, measured as hours o f supply, has improved dramatically. Furthermore, there has been significant progress towards financial sustainability in al l the cities.
2. with direct oversight for pol icy and strategic matters by the Executive Chairmen. The main departments include investment, operations, financial and planning and business development. The Investment Department implements the growing capital works program which includes the procurement o f the investments. The Operations Department works proactively with the private operators, both Vitnes and AdeM, to further improve the operations o f the water schemes. The Financial Department i s responsible for accounting management, inventory and asset management, budget control, treasury control and disbursement. The Planning and Business Development Department undertakes the responsibility for development and oversight of the financial planning model, acts as a strategic "think tank" for business development and to assure FIPAG's sustainability. In addition, FIPAG i s de -concentrated to the main cities where it i s responsible for investments including Beira, Nampula, Quelimane Pemba, etc.
FIPAG is organized as 4 main departments headed by the CEO for day to day control
3. Operations in the FPAG cities are delegated to private sector operators under a variety o f contracts including lease, management, and service. The second generation o f contracts for the 4 cites are o n track to be bid out as enhanced lease contracts.
4. Beira, Nampula, Quelimane and Pemba. This i s to take advantage o f the additional water available as a result o f the upgrading o f the sources o f supply under NWDP 11. This wil l be expected to facilitate about 10,000 new connections and provide for around 53,000 new consumers. The level o f service is yard taps. The areas chosen for the new extensions are as follows:
0 Beira-Dondo: Macurungo West, Manga, Inhamizua 0 Pemba: Ingonane, Natite, Maringanha 0 Ouelimane: Janeiro and Torrone NOVO, 17 de Setembro, Sangariveira, 3 de Fevereiro 0 Nampula: Muahivire Expansgo, Muatala and Mutananha, Namicopo, Namutequeliua,
Bamboo in Netikiri, Muhala Expansgo,
Main Investments: WASIS provides for investments for the extension o f the networks in
38
Table A4-1: Estimated networks and connections in four cities. Location Total length o f new network (km) I6Estimate o f Possible new connections (No.)
Beira Pemba Quelimane Nampula Total 132 80 74 84 370
3000 2250 2250 2500 10,000 ~~ I Estimated potential population served (No.) I 15900 I 11925 I 11925 I 13250 I 53,000 I
~~~~ ~~
Estimated Cost (USD million) 5.50 3.10 4.40 4.00 17.00
5. Support to Component A would include:
(a) Expand and extend the networks and distribution through l imited investments in small works in Pemba, Nampula, Quelimane, and Beira, operated and managed by a private operator - US$17 million; (b) Provide support to operational efficiency, management efficiency, and consumables to the investments under the responsibility o f FPAG - customers' meters, quality control equipment, replacement parts, emergency and maintenance equipment, vehicles, chemicals, and conswnables (fuel and electricity) - US$2.5 mi l l ion (c) Support to FIPAG for training, capacity building, supervision o f works, and technical assistance - US$2.5 mil l ion.
Component B: Capacity building, institutional and operational Support to DNA (US$5.5 million)
6. Development ofthe Asset Manazement Unit : The component supports the adaptation of the proven sustainable institutional and regulatory modalities for secondary cities under an AMU based o n the delegated management model proven in the experience from FIPAG cities. On a pi lot basis, the credit wil l support a proposed Asset Management Unit (AMU) to be developed as a specialized Unit using, as applicable, the existing structure o f the Department o f Urban Water (DAU) within DNA. The unit i s intended to be responsible for a l l urban systems not managed by FIPAG, Le., not currently subject to the Framework for Delegated Management. Unl ike FIPAG, AMU i s expected to be the entity responsible for managing both the water and wastewater public assets located in Municipal and District urban centers. AMU, when legally established, i s expected to have the power to mobilize, plan and manage dedicated hnds, plan and oversee the execution o f investments, promote public private partnerships for the development and delivery o f services and introduce performance contracts with autonomous operators.
7. responsibility for the WSWS systems to the Municipalities and the empowering o f the Districts to assume responsibility for commercial management o f the systems i s foreseen (and would be promoted by the proposed framework), the G o M wil l continue to bear the ultimate responsibility for assuring that collective needs are met. Given the lack o f locally available financial resources at the local levels, i t i s expected that the G o M will continue to finance most investments for the
AMU would be a unit developed by DAU and DNA. . Although the devolution o f
l6 Estimate o f new connections i s conservative based on past practice. If GPOBA funding for connections becomes available, the number o f new connections could triple.
39
medium term; however operation and maintenance will be expected to be fully met for a number o f larger towns and municipalities over the project period (See Figure A4-1).
Box A4-1: Functions and Powers of the AMU AMU would be a DNA’s dedicated unit and would undertake the following core functions:
Direction - strategy, planning, budgeting and monitoring Administration and Finance - accounting, administration and human resources management, support services Investments - planning, analysis, procurement and project supervision Operations Monitoring and Improvement - development o f strategies for improvements in the operation and management o f water supply and wastewater services, economic and financial analysis o f services, and tariff analysis and negotiation, performance contracting and monitoring o f PWBs External Relations, Training and Technical Assistance - coordination with other government entities, consultation and communication with consumers, planning and management o f training and technical assistance Legal and Regulatory Matters - legal advice, monitoring regulatory compliance and reporting
8. history in managing the urban water supply sector with the delegated management framework. FIPAG and AMU will:
9. Water Boards (PWBs), in which Municipalities and Districts with urban WSWS and the Provincial Government o f the Province in which they are located would be represented, i s also proposed. AMU would delegate responsibility for contracting and supervising service operators to the PWBs through a performance contract. This arrangement would further the decentralization and devolution process and promote local governments’ involvement in and “ownership” o f PPP arrangements. I t would introduce opportunities to capture economies of scale and would create a mechanism for more transparent and effective consultation between central and local levels regarding the planning and implementation o f investments.
I t i s envisaged that FIPAG will serve as a mentor to the AMU given FIPAGs long
Collaborate and cooperate in implementing this second generation o f the Framework for the Delegated Management Water Supply Collaborate and cooperate in investment planning; Work toward a criteria for assigning the systems to FIPAG or to AMU v ia the MOPH. Provide advice and TA to AMU and operators o f services within the proposed new framework.
Creation of the Provincial Water Boards (PWBs): The creation o f autonomous Provincial
10. Board o f Directors (BOD) o f PWBs. Typically, i t will comprise o f 4-6 members - with 1 member fkom provincial government and 3-5 members f rom municipalities and districts. This BOD will represent the interests o f and report to stakeholders, negotiate and s i g n Performance Contracts with AMU, monitor and report o n compliance with the Performance Contract, appoint o f an Executive Director, approve o f budgets and business plans of PWB
It i s envisaged that the diverse stakeholders will be appropriately represented in the
11. Monitoring o f Provincial Water Boards. T o prepare the AMU to take o n this responsibility, they wil l be provided technical assistance that will include 1) Drafting and negotiation o f ini t ial
After the PWBs are set up, the role o f AMU would be Performance Contracting and
40
performance contracts with PwBs and 2) Training in the use o f the indirect regulatory framework for smaller towns and cities developed by CRA.
12. Support to a SWAP: Thegroject will co-ordinate with other donors to provide capacity building and institutional support with respect to development o f the SWAP approach for rural areas - small piped and non-piped systems. The Af i ican Development Bank, among other donors, is supporting this effort significantly. The Bank’s value added will be to provide support in preparing the medium-tern expenditure framework to facilitate the implementation o f the sector pol icy and, to the extent possible, support the preparation o f common guidelines for al l future investments in the sector regardless o f the source o f financing.
13. Support for Component B would include: TA, capacity building, and training to develop smaller cities and towns framework, work towards the SWAP, support the MTEF for the sector and an investment framework, and support mitigations strategies with respect to H N / A I D S . - AMU US$l.O million.
Operatioanlize AMU and pi lot proposed Water Boards in two provinces to include office equipment, vehicles, operational cost support, and TA. US$ 2.0 million.
Management and operational cost support for p i lot provincial systems including TA, goods and equipment. U S $ 2.5 mil l ion.
Component C: Capacity, Institutional and operational support to CFU (US$2.5 million) - 14. This will: (a) provide resources to compliment CRA’s expanding work o n extending regulatory frameworks and over-sight to smaller cities and towns; (b) provide continuing operational work, capacity building, and technical assistance to CRA.
0
0
15. supply systems, supervising the performance and quality o f the service and establishing the water tar i f fs. Currently, i t directly regulates only services under the jurisdiction o f FIPAG which have been placed under delegated management through contracts with a private firm. To provide effective and appropriate regulation o f the growing number o f services o f different sizes, technical sophistication and financial capacity, CRA’s leadership foresees the need to offer several tiers o f regulatory services. In addition to direct regulation the menu could include indirect regulation whereby C R A would supervise decentralized regulatory agents. Such agents would have decision authority, but CRA would monitor them to ensure that they apply and enforce C R A regulations appropriately. Another tier o f service would be regulatory advice to Municipalities that provide water, wastewater, and sanitation (WSWS) as municipal services and are not expressly included under CR4’s jurisdiction.
The Water Remlatow Council ERA) has the general attribution o f regulating al l water
16. the integration o f sanitation into the water supply service sustainability concept, i t i s desirable that, in the context o f the planned review o f its role, strategies and structure and the probable revision o f i t s constitutional articles, CRA propose and be authorized to develop a regulatory framework and differentiated regulatory approaches that could be applied to al l urban WSWS whether publ icly or privately operated.
In order to accommodate the new stakeholders in the water sector (AMU and PwBs), and
41
17. Support for Component C would include:
e smaller towns and cities - US$1.5 million. e
provincial level and to continue high level o f operational standards at C R A head office US$1 .O million.
TA, Capacity building and training support to expand regulatory framework to
Operational support and equipment (including vehicles) to expand C R A to
42
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Annex 5: Project Costs
MOZAMBIQUE: Water Services and Institutional Support Project
44
Annex 6: Implementation Arrangements
MOZAMBIQUE: Water Services and Institutional Support Project
Indicator Production Hours o f service Water Quality
1. Management Reports (FMR). These reports will cover three main areas and include: progress on the outcome indicators, advancement o f procurement, and review o f financial management aspects (This i s more fully discussed in Annex 7. IDA, in tandem with the clients, wil l undertake six monthly reviews to report on progress. Specific processes and indicators for Component A and for Component B are discussed below.
FIPAG and C R A wil l each report quarterly to IDA via the Quarterly Financial
Unit Cubic meters quarterly Hours per day No. o f tests for residual chlorine in distribution system not meeting agreed
2. the responsibility o f FIPAG. The outputs will be measured by o f a set o f performance indicators Which form a sub-set o f the present indicators reported under NWDP I I? These wil l build on the extensive data base already established by FIPAG and monitor the progress o f the network expansion and service connections as wel l as other important indicators. The total set of indicators will be set out in the contract with the private operators for the 4 cities. These indicators wil l include, but will not be limited to, the following:
Component A: The reporting requirements for the technical outputs for WASIS wil l be
No. o f connections Bill collection ratio
New connections per quarter %
I standards. I Km No. o f km o f network
3. Operator to the client on a monthly basis. Progress will be assessed against the target indicators and corrective action taken as appropriate to ensure that the project goals are achieved. At the end o f each year, the annual performance wil l be reported to and assessed by FIPAG. Reporting o f the indictors wil l be included in the quarterly management reports to IDA.
As i s usual in private sector contracts for operations, monthly reports will be made by the
4. Components B and C: The output indicators wil l be the responsibility o f both DNA and CRA. Implementation o f the proposed institutional reform and introduction o f the delegated management framework for operation o f non-FIPAG urban water supply services would be kept o n track and monitored by establishing a work plan for completing key activities. Annex 3 set out the arrangements for results monitoring and l ist the key activities and a timefkame of completion by project years. AMU would be expected to establish and maintain a detailed rol l ing 12-month work plan for implementing the key activities under its mandate and submit a br ief report on progress and an updated work plan to the Director o f DNA every three months. DNA would also be required to report on the progress o f the SWAP. Reports o f the Joint Sector Review, b i -annually, should be included in the FMR under progress on outcome indicators.
5. components and report quarterly on progress in the FMR. CRA's outcome indicators by year of the project are also set out in Annex 3 and progress on these indictors wil l be reported quarterly
Likewise C R A would be expected to maintain a work plan for implementation o f its
45
in the FMR. Note that CRA will be h l ly responsible for the procurement and financial management aspects o f the FMRs.
46
Annex 7: Financial Management and Disbursement Arrangements
MOZAMBIQUE: Water Services and Institutional Support Project
1. The financial management assessment was carried out in accordance with the Financial Management Practices Manual issued by the Financial Management Board o n 3 November 2005. The objective o f the assessment was to determine whether the implementing agencies (FIPAG and CRA) have acceptable financial management arrangements, which will ensure: (1) the funds are used only for the intended purposes in an efficient and economical way, (2) the preparation o f accurate, reliable and timely periodic financial reports, and (3) safeguard the agencies’ assets.
2. The overall conclusion o f the financial management assessment i s that the project’s financial management arrangements have overall rating o f modest which satisfy the Bank’s minimum requirements under OP/BP 10.02 expect for the issues mentioned in the financial management action plan.
3. Countw Issues: A Public Financial Management Assessment conducted in September 2004 {as follow-on to the 2001 Country Financial Accountability Assessment (CFAA)} concluded that the overall public sector financial management r isk in Mozambique remained high. Management o f the economy was quite satisfactory, but comprehensiveness and transparency o f the budget needs to be strengthened, the medium-term planning and budgeting was weak, while budget execution and accounting and reporting presented quite serious weaknesses.
4. At the same time, a number o f reforms were moving ahead in a very structured and comprehensive manner. The govenunent has completed a number o f key preparatory reforms and has: (i) issued regulations for the Financial Management law; (ii) initiated the introduction o f a new and more-detailed functional classifier into the budget; (iii) started to formulate the budget in current prices; (iv) introduced restrictions o n bank accounts held by public institutions; (v) started to incorporate off-budget revenues as we l l as donor-funded expenditures into the budget; (vi) initiated training for budget staff in double-entry accounting; and (vii) established a consolidated electronic treasury account to improve control o f treasury operations and cash management.
5. One key reform has been the introduction and implementation o f a computerized integrated financial management information system, e-SISTAFE. This has been rolled out in al l ministries at central and provincial level, The Bank i s part o f a group o f donors which has financed selected components o f the system, and i s also part o f a Quality Assurance Group established to provide an independent view o f the management, progress, and achievements o f the SISTAFE project. A report o f this grouping issued in November 2005, noted the satisfactory production o f budget execution reports for the period January to August 2005.
6. Expenditure and Financial Accountability (PEFA) methodology concluded that there have been improvements in a number o f important areas which were beginning to have an impact. The budget was a credible document with final out-turns reasonably close to init ial approvals; there was also a steady improvement in revenue collection and administration. Fundamental weaknesses remained in the quality o f the public financial management systems (PFM) especially in internal control systems, l imited coverage o f the external audit, and the high-level o f off-budget spending mainly f rom external project finance. The report noted that the quality o f
A report on the Assessment o f Financial Management for 2004/05 using the Public
47
the PFM was expected to continue improving as a natural consequence o f ongoing reforms such as e-SISTAFE; however, this would take time.
Risk Assessment and Mitigation
Risk
Inherent Risk Country Level
Entity Level
Project Level
Control Risk Budgeting
Accounting
Internal Control
Funds Flow
Financial Reporting
Auditing
Risk Rating
S
L
L
M
M
S
L
M
L
Table A7-1: Risk Assessment and Mitigation Risk Mitigating Measures incorporated into the Project Design
A number o f initiatives and Public Financial Management reforms are taking place including e- - - STSTAFE roii-out.
- FIPAG and CRA are separate legal entity and well established. I t i s implementing on-going Bank- financed project. This i s a repeater project and it will be implemented by same implementing agencies. I t will involve few spending units.
Budget preparation well defined, and there i s regular monitoring on the implementation o f planned activities and the use o f funds. Whereas FIPAG i s able to properly and budget for the entity’s requirements, the amount allocated in the approved budget i s often below the required amount to implement FIPAG’s activities. Accounting policies/procedures are documented in Financial Procedures Manuals. However, there s t i l l some room for improvement, particular for FIPAG Delegations. Accounting policies/procedures are documented in the Financial Procedures Manuals. However, FIAPG Internal Audit Department i s weak. The Internal Audit Department should strengthened by hiring additional staff. Funds f low arrangements are simple with centralized procurement and payments for the project activities. Financial reports are generally prepared on a timely basis. The formats o f interim unaudited financial reports w i l l be agreed by negotiations. The projects implemented by FIPAG and CRA are audited annually. FIPAG financial statements are also audited annual. The project wil l be audited by independent audit f i annually.
Conditions of Negotiations, Board or Effectiveness (Yes or No)
No
No
N o
No
Yes
N o
N o
Yes
No
7. project, the overall financial management risk rating for the project i s Modest.
In view o f the general country financial management issues and the issues peculiar to the
8. the project in terms o f being capable o f recording correctly a l l transactions and balances, supporting the preparation o f regular and reliable financial statements, safeguarding the entity’s assets, and are subject to auditing arrangements acceptable to the Bank. The financial management issues raised in audit reports and management letters had been discussed with FIPAG and CRA financial management staff.
The supervision missions have been reviewing the financial management arrangements of
48
9. acceptable financial management arrangements for the project including the project’s system accounting, reporting, auditing, and internal controls. However, the mission identified two issues requiring attention o f FIPAG management and financial staff. These issues include: availability o f counterpart h d s and management o f the Special Account. Therefore the overall recommended FM rating in ISR was satisfactory over the last three years, however, the separate l ine o f Counterpart funds in ISR has been rated Unsatisfactory. This rating, however, is a result o f non-payment o f VAT/IVA. The counterpart funds that were allocated under the project were provided in a timely manner and there was never an issue o f the Government withholding counterpart as defined in the DCA. .
The conclusions o f the missions were that FIPAG and C R A continue to maintain
10. ImpZementing entity: The project will be implemented by FIPAG and C R A (the implementing agencies). Fiduciary matters (financial management and procurement) will be handled by FIPAG and C R A staff. FIPAG has overall responsibility o f implementation o f Component A o f the Project. And, C R A will handle fiduciary matters o f Components B and C. DNA will be responsible for technical issues o f Component B. The project wil l make use of the institutional framework o f FIPAG and CRA, as well as arrangements in place for fiduciary matters (procurement and financial management).
1 1. preparation wel l defined, and there i s regular monitoring o n the implementation o f planned activities and the use o f funds. The annual budget i s prepared based on the pol icy guidelines and regulations issued by the Ministry o f Finance.
Budgeting: A project budget has been draw up and i s included in both the PAD. Budget
12. basis o f accounting. The project wil l comply with International Public Sector Accounting Standards (under the Cash Basis o f Accounting), as promulgated by the International Federation o f Accountants (IFAC). The accounting policies and procedures, including chart o f accounts, are documented in the Financial Procedures Manuals
Accounting: The project’s accounting records wil l be maintained using the adopt cash
13. FIPAG and C R A accounting system are based on conventional accounting software called “Primavera”. This accounting package has proved to be adequate as FIPAG and C R A are able to produce necessary reports required to manage and monitor their financial operations. The chart o f accounts at both agencies wil l be adjusted to able to identify project activities and disbursement categories. And, this activity will be condition o f effectiveness.
Internal Control and Internal Auditing
14. ,%#&: The implementing agencies have qualified and experienced staff handling financial management issues. The project i s embedded in the operations o f both agencies, to be implemented by the relevant staff agencies. Therefore, financial management issues o f the project will be handled by accounting personnel o f FIPAG and CRA, who are implementing on- going Bank-financed project. Both institutions believe that the current number and ski l ls of accounting personnel are adequate to be responsible for financial operations, including o f the proposed project.
15. document the accounting systems, policies and procedures to be employed. The manuals describe the accounting system, internal control procedures, basis o f accounting, standards to be
49
Internal controls: The implementing agencies have Financial Procedures Manuals that
followed, authorization procedures, financial reporting process, budgeting procedures, financial forecasting procedures, and contract management. In addition, the manuals document procedures to be undertaken for the replenishment o f the Designated Accounts and auditing arrangements.
16. Internal Audit: FIPAG has an internal audit department which, reports to the chairman. I t has only one staff, therefore has l imited capacity to cover FIPAG operations. This department i s being strengthened by hiring an additional internal auditor. The proposed project wil l use the existing structures o f FIPAG, including those o f the internal audit. Therefore the increase in audit staff should improve the current situation o f the internal audit fimction for project operations. The frequency and extent o f the internal audit reviews and testing o f the internal controls should be consistent with the nature, and risk o f the relevant project activities.
17. government (including projects) i s the responsibility o f the Inspectorate General o f Finance (Inspecqiio Geral das Finanqas-IGF). The IGF is understaffed and has l imited capacity to oversee project implementation. There will therefore be need for thorough supervision, as wel l as quality assurance o f the project.
There i s no internal audit function at CRA. However, internal auditing across the entire
50
Funds Flow and Disbursement Arrangements Figure A7-1: funds f l o w mechanism
I I I I I I I I I I I
I I I I I I I I I I I
T
Designated Account
C R 4
Designated Designated
FPAG
Suppliers o f Goods and Services
Key F l o w o f funds (USD for IDA and ACGF)
- - - - - - - - - - - - _ - -+ Withdrawal applications for IDA and ACGEF Invoices
+ -..- . . - . . - . . - . .
5 1
Disbursement arrangements
Category Amount of the Credit Allocated (expressed in
USD)
18. expenditures (transaction based disbursements). IDA would then make advance disbursement f rom the proceeds o f the Credit and Grant by depositing into the implementing agencies operated Designated Accounts (DAs) to expedite project implementation. The advance to D A s would be used by the implementing agencies to finance project expenditures under the proposed Credit and Grant. Another acceptable method o f withdrawing funds from the Credit and Grant i s the direct payment method, involving direct payments f rom the Credit to a third party for works, goods and services upon the implementing agency’s request. Payments may also be made to a commercial bank for expenditures against IDA special commitments covering a commercial bank’s Letter o f Credit. The Disbursement Letter will stipulate a minimum application value for direct payment and special commitment procedures to be determined during negotiations.
Disbursements from IDA and ACGF would be made o n the basis o f incurred eligible
Percentage of Expenditures to be Financed
(inclusive o f Taxes)
19. Upon Credit and ACGF Grant effectiveness, the implementing agencies would submit withdrawal applications for ini t ial advances to the D A s drawn from the IDA Credit and ACGF Grant, in amounts agreed to in the Disbursement Letter. Additional advances o f funds from IDA to the DAs will be made upon evidence o f satisfactory utilization o f the previous advances, reflected in SOEs and/or on full documentation for payments above SOE thresholds. Withdrawal applications documenting expenditures would be required to be submitted monthly. A disbursement condition for the IDA Credit (under Category 3 (a)) is that the AMU has been established by decree.
(1) C iv i l Works for Part A (a) (i) o f the Project
(2) Goods, consultants’ services, and training for:
Annex 7: Table AI - Disbursement per Expenditure Category to be financed by IDA (USD million and %)
1,000,000 100%
(b) Parts B and C o f the Project
(3) Operating costs for;
(a) Parts B (a) and B (b) o f the Project
(b) Part C o f the Project
4) Consumables (fuel) and electricity for Part A o f the Project
Unallocated
4,500,000 100%
2,000,000 100%
500,000 100%
500,000 100%
1,500,000
(a) Part A(b) except for A(b) (i)(3); and Part A (c) o f the Project
TOTAL AMOUNT
5,000,000
15,000,000
100%
52
Annex 7: Table AI1 - Disbursement per Expenditure Category to be financed by ACGF (USD million and YO)
Category
(1) Works under Part A (a) (ii), and Goods under Part A (b)(i)(3) o f the project;
TOTAL AMOUNT
Amount of the Grant Allocated
(expressed in USD)
Percentage o f
Expenditures to be
Financed
(inclusive of Taxes)
15,000,000 100%
15,000,000
~
Banking arrangements
20. purposes o f implementation o f the project. All three accounts will be held in the Commercial Banks. Details o f the accounts are set out below:
The implementing agencies will open and maintain three separate bank accounts for the
0 Desimated Account A: To be managed by FIPAG, and denominated in U S dollars, disbursements f rom the IDA credit will be deposited in this account to finance activities under the relevant components; Desimated Account B: T o be managed by FIPAG, and denominated in US dollars, disbursements f rom the ACGF grant will be deposited in this account to finance activities under component 3: Capacity Building; and Desimated Account C: T o be managed by CRA, and denominated in U S dollars, disbursements from IDA will be deposited in this account to finance activities under the relevant components;
0
0
Financial Reporting
21. The implementing agencies wil l produce o n regular basis required financial reports to manage and to monitor the project. Interim unaudited financial reports will be produced o n a quarterly basis. The contents o f these reports should at least consist o f the following: (i) financial reports, including a statement o f sources and uses o f funds and a statement o f uses o f funds by project components and activities; (ii) procurement, and physical progress reports. The formats o f interim unaudited financial reports will be developed by project negotiations.
22. which wil l comprise of:
The implementing agencies will also produce annual project entity financial statements,
a. A Statement of Sources and Uses of Funds / Cash Receipts and Payments which recognizes al l cash receipts, cash payments and cash balances controlled by the entity for this project; and separately identifies payments by third parties on behalf o f the agency.
53
b. The Accounting Policies Adopted and Explanatory Notes. The explanatory notes should be presented in a systematic manner with items o n Statement o f Cash Receipts and Payments being cross referenced to any related information in the notes. Examples o f this information include a summary o f fixed assets by category o f assets.
c. A Management Assertion that IDA funds have been expended in accordance with the intended purposes as specified in the relevant Wor ld Bank legal agreement.
d. The entities will also produce annual entity financial statements in accordance with the relevant laws and regulations.
Auditing
23. reports (for both implementing agencies) for the year ended December 3 1 , 2006 together with the management letters were received o n time. This continued the trend experienced on the project in the previous years o f timely submission o f audit reports. The auditors expressed a separate unqualified opinion for FIPAG components and Netherlands Trust Fund on the project financial statement, the special account, and the statement o f expenditure. However, the auditors expressed a qualified opinion for the CRA-Water Regulatory Council component on the financial statement and special account due to substantial delays on allocation o f counterpart fimds by the GoM. I t i s noted, however, that the G o M has paid al l counterpart funds that were specified in the D C A and other Legal agreements under the NWDP 11. There i s a separate unqualified opinion o n the statement o f expenditures for CRA. The auditors noted some weaknesses in the system o f internal control in FIPAG and an additional accountant is being recruited for internal audit. This should address the weaknesses identified including that the project accounting system i s based on excel spreadsheets, and that the f ixed assets register maintained by FIPAG does not include identification elements such as asset code, contract number, supplier and that some items lacked acquisition costs.
The on-going Bank-financed project i s audited by private audit firm annually. The audit
24. with International Standards on Auditing as promulgated by the International Federation of Accountants (IFAC) and the audit report wil l be submitted to IDA within 6 months after the financial year-end. The costs incurred for the audit will be borne by the project funded by IDA.
The project financial statements wil l be audited by independent auditors in accordance
25. statements, as per the guidelines “Financial Management Practices in World bank-Financed Investment Operations”, o f November 3,2005 and the audit report will be submitted to IDA within 6 months after the financial year-end. In addition, a detailed management letter containing the auditor’s assessment o f the internal controls, accounting system and compliance with financial covenants in the IDA Financing Agreement, and suggestions for improvement wil l be prepared and submitted to management for follow-up.
The auditors will be required to express a single opinion o n the project financial
26. statements shall be communicated to IDA through agreed terms o f reference.
The arrangements for the appointment o f the external auditors o f the project financial
27. The C R A and FIPAG will maintain financial management systems in accordance with international accounting standards, and have their entity financial statements and the project financial statements audited in accordance with international auditing standards. These audits shall cover the period o f one Fiscal Year, The audits for each such period shall be furnished to the Association not later than six months after the end o f such period
54
28. project implementing agencies due date for submission.
The figure below identifies the audit reports that will be required to be submitted by the
Audit Report 1) Continuing entity financial statement 2) Project specific financial statements 3) Special Opinions
0 SOE 0 Designated Account
Due date 6 months after the end o f the reporting period 30" June o f each following year No t applicable
Conditionality
1
29. system, adequate to produce interim unaudited financial reports, in form and substance satisfactory to the Association, to ensure proper accounting and monitoring o f project finds.
By effectiveness - The implementing agencies have adjusted the financial management
Action Responsibility Completion date Adjust the financial management and accounting systems, including a Chart of Accounts, to be able to identify project activities, and disbursement categories.
FIPAG and CRA Effectiveness
Action Plan
30. In order to establish an acceptable control environment and to mitigate financial management risks the fol lowing measures should be taken by the due dates as indicated in the financial management action plan below.
Table A7-3: Financial management action ~ l a n
Supervision Plan
3 1. Financial management supervision will be carried out by the Financial Management Specialist (FMS) at least once a year in l ine with the modest risk rating. The FMS will also:
Conduct an FM supervision before effectiveness/disbursement; Review the financial component o f the quarterly interim unaudited financial reports; and Review the Audit Reports and Management Letters from the external auditors and follow-up o n material accountability issues by engaging with the TTL, Client, andor Auditors.
0
0
0
55
Annex 8: Procurement Arrangements
MOZAMBIQUE: Water Services and Institutional Support Project
A. General
1. Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated M a y 2004, revised October 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated M a y 2004 revised October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
Procurement for the proposed project would be carried out in accordance with the World
2. Procurement of Works: Works procured under this project would include: Design and construction o f water supply networks, rehabilitation o f network sections, including the replacement o f pipes and fitting, electricity works, etc. The procurement will be done using the Bank's Standard Bidding Documents (SBD) for al l I C B and National SBD agreed with or satisfactory to the Bank. Contracts o f works costing U S $ l .O mil l ion equivalent or more per contract will be procured through ICB. Works estimated to cost more than equivalent US$75,000 but less than US$l.O mi l l ion will be procured through NCB. Small works estimated to cost US$75,000 per contract may be procured using the Shopping method by requesting at least three written quotations form qualified contractors. Direct Contracting may be used when it can be justified that a competitive method i s not advantageous and meets the requirements under paragraph 3.6 o f the Procurement Guidelines and after consultation with the Bank. The prior review threshold for works contracts would be US$500,000 equivalent per contract. Pre- qualification o f contractors will be used only for large contracts over US$lO.O mi l l ion or in cases where special expertise i s required.
3. motorcycles, chemicals for water treatment, pipes, valves, meters, pumps, information and technology equipment, furniture and office equipment, among others. The procurement will be done using the Bank's SBD for al l I C B and National SBD agreed with or satisfactory to the Bank. Goods estimated to cost equal to US$250,000 equivalent or more per contract would be procured through I C B procedures. Good estimated to cost less than US$250,000 equivalent per contract would be procured through N C B procedures. Goods contracts estimated to cost less than US$50,000 equivalent per contract may be procured using the shopping method. Procurement from IAF'SO and direct contracting may also be considered with the Bank's prior review and approval. The prior review threshold for goods contracts would be US$200,000 equivalent per contract.
Procurement of Goods: Goods procured under this project would include vehicles,
4. Selection of Consultants: Consulting services to be financed will include: Works supervision and contract management, Technical Assistance in Procurement and Construction Management, Technical assistance for developing smaller cities and town delegated management framework, small water system management. All consulting service contracts costing equal to US$lOO,OOO or more for firms will be awarded through Quality and Cost Based selection (QCBS) method. Contracts estimated to cost less than US$lOO,OOO equivalent may be
56
contracted through Consultants’ Qualification (CQS). Consulting firms for carrying out standard or routine nature assignments such as audits would be selected through Least Cost (LCS). Individual Consultants would be selected on the basis o f their qualifications in accordance with Section V of the Consultant Guidelines. Single source may be used where it can be justified and afier consultation with the Bank. Short lists o f consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. Consultancy services estimated to cost above US$lOO,OOO equivalent per contract for firms and above US$50,000 equivalent per contract for individual consultants and single source selection o f consultants will be subject to prior review by the Bank.
5. vehicles, office supplies, communication charges, equipment, utility charges, travel expenses, per diem and travel costs, office rental, among others.
Operating Costs: Operating costs shall consist o f operation and maintenance costs for
6. o f training plans, including proposed budget, agenda, participants, venue o f training and other relevant details, will be required on annual basis.
Training: Training costs include workshops, seminar and associated costs. Prior review
7. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured, are presented in the Operations Manual to be produces by the Borrower by effectiveness.
B. Assessment of the agency’s capacity to implement procurement 8. procurement activities under the Component B and C will be carried by CRA.
Procurement activities for Component A will be carried out by FIPAG, while the
B1. Assessment of FIPAG’s Capacity 9. FIPAG i s staffed by a Chief Executive Officer supported by various Managers, including an Investment Manager (proficient in Procurement). The procurement hnc t i on i s under the Investment Department and it i s staffed by a procurement officer and a procurement assistant and with a Technical Assistance from a Procurement Advisor.
10. actions for the project was carried out and found to be adequate as FIPAG has been implementing satisfactorily the Bank financed Second National Water Project with the same team. At the meeting held o n March 19,2007 the current performance o f FIPAG and the organizational structure for implementing the project was reviewed as we l l as FIPAG the relationship with the implementers and beneficiaries o f the other two components. I t was agreed that FIPAG will have a leading role in consolidating the Procurement Plan on behalf o f a l l three beneficiaries before sending for Bank review and clearance. This will apply for the original Procurement Plan to be agreed during Appraisal and the subsequent updates during the l i fe o f the Project.
An assessment o f the capacity o f the Implementing Agency to implement procurement
1 1. The key issues and risks concerning procurement for implementation o f the project have been identified and include the need o f improving the record keeping. The corrective measures which have been agreed are the establishment o f an acceptable procurement filing and record keeping system prior to project effectiveness. The action plan given below will be followed during the implementation o f the project and some actions will constitute conditions for negotiations and effectiveness.
57
12. The procurement r isk for the FIPAG component i s Moderate.
N o adequate controls and accurate knowledge o f contract execution information
B2. Assessment of CRA’s Capacity
ontract system in stablish a Contract execution E process d a monitoring system FIPAG and C R 4
13. the Second National Water Project. The C R A Chief Executive Officer has been carrying out satisfactorily the procurement for CRA.
CRA has been implementing in the last three years a US$5.5 mil l ion component under
14. activities related to its own component, be also in charge o f carrying out the activities under the National Directorate o f Water (DNA) component. For this purpose and to support the CRA Chief Executive Officer, a Procurement Officer will be recruited under qualifications and experience acceptable to IDA and will be full time employed by CRA.
Under the present project CRA has agreed to, in addition to carry out the procurement
15. Present CRA capacity to carry out procurement was assessed o n March 19,2007 and found to be adequate and the anticipated procurement and work load under the new project is of similar nature. The organizational structure for implementing the project was also reviewed, particularly the relationship with the National Directorate o f Water (DNA) that has entrusted i t s procurement to CRA. C R 4 will liaise with the Bank on al l procurement related issues under the components B and C, the latter for DNA. The Procurement r isk for the implementation of these components i s Average.
16. establishment within project beneficiaries prior to project effectiveness.
17.
The action plan below was developed to ensure that adequate implementation capacity is
The overall project risk for procurement i s Average.
ake account o f the
C. Procurement Plan
18. which provides the basis for the procurement methods. This plan has been agreed between the
The Borrower, at appraisal, developed a procurement plan for project implementation
58
1 2 3 4 5 6 7
Ref. Contract Estimated Procurement Domestic Review Expected No. (Description) cost Method Preference by Bank Bid-Opening
(US% 000) (yedno) (Prior / Post) Date
W1 Contractor to Design and Construct the Network for Beira and Quelimane Package 1 : Beira Package 2: Quelimane
W 2 Contractor to Design and Construct the Network for Pemba and Nampula Package 1 : Pemba Package 2: Nampula
Distribution Centre at Quelimane
Reservoir at Nampula (1 000 Cum capacity)
W3 Construction o f Water
W 4 Construction o f Water
9
Comments
8700
5400
400
800
59
G8
G9
G10
4-4 24-4-08
Spare parts (Such as valves, pumps, pipes etc) LOT 1
Spare parts (Such as valves, pumps, pipes etc) LOT 2 Supply o f Equipment and 300 ICB No Prior Spare parts (Such as valves, pumps, pipes etc) LOT 3 Supply o f Meters 500 ICB No Prior
Supply o f Equipment and 150 NCB No Post
1 17-11-07 I
G11 Purchase o f 4 Vehicles 160 NCB No Post G12 Supply o f Office 50 L S No Post
24-8-07 24-08-07
G13
G14
G15
G16
Furniture
Furniture
equipments
For 2007
Supply o f Office 50 L S No Post 24-09-09
Supply o f Goods - IT 50 L S No Post 25-07-07
Supply o f Chemicals - 300 ICB No Prior 17-07-07
Supply o f Chemicals - 300 ICB No Prior 17-12-07
G17 G 18
For 2008 Purchase o f 4 Vehicles 160 NCB No Post 24-9-08 Supply o f Goods - IT 50 L S No Post 25-07-07
(b) Contracts estimated to cost equal to US$200,000 or more for Goods and equal to US$500,000 or more for Works and al l direct contracting will be subject to prior review by the Bank.
G19
G20
G21
60
equipments
2009 Supply o f Chemicals for 300 2010 Purchase o f 2 Vehicles
Supply o f Chemicals for 300 ICB N o Prior 17-12-08
ICB No Prior 17-08-09
80 NCB No Post 25-10-09
G22 Supply o f 8 Vehicles 140 NCB No G23 Supply o f Computers and 50 L S No
Post 24-1 1-08 Post 24-04-08
G24 Equipments Supply o f Furniture’s 58 L S No Post I 20-10-09 I
2. Consulting Services
1
Ref. No.
(a) L i s t o f consulting assignments with short-list o f international f i rms.
2 3 4 5 6 7
Description of Assignment Estimated Selection Review Expected Comments cost Method by Bank Proposals
(US% 000) (Prior / Post) Submission
CON7 TA to develop small 300 QCBS Prior cities and towns framework - AMU
SWAP CON8 TA for Rural Water 500 QCBS Prior
FIPAG C O N 1
C O N 2
24-10-07
24-10-07
C O N 3
CON4
CON5
C O N 6
CON9 Umbrella TA 1450 QCBS Prior C O N l Procurement Specialist 80 IC Prior 0 C O N l Financial Assistant 36 IC Post 1
Consultants Service for Standardization and Compilation o f Design Consultants Service for Supervision o f Works for Beira and Quelimane Consultants Service for Supervision o f Works for Nampula and Pemba Technical Assistance for Construction Management for
10-0 1-08 09-01-08
04-0 1-08
FIPAG for two year Technical Assistance for Procurement and Contract Management for FIPAG for two year Consultants Service for Design and Supervision o f a Water Reservoir at Nampula and a Water Distribution Centre at Ouelimane
750 I QcBs
350 I C
200 QCBS
Post
Prior
Prior
Prior
Prior
Prior
08-11-07 I
29-9-07 I 29-9-07
24-9-2007
Note: QCBS- Quality and Cost Based Selection CQ - Selection Based on Consultant’s Qualification I C - Individual Consultant
61
(b) Consultancy services estimated to cost equal to US$lOO,OOO equivalent or more per contract for f i rms and above US$50,000 equivalent per contract for individual consultants and single source selection o f consultants will be subject to prior review by the Bank
ACGF
(c) Short l i s ts composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
U S $ Plan Ref: Method 3,000,000 Design and Construction o f W1, W2 I C B
F. Arrangements for Retroactive Financing
IDA
20. ACGF Grant. The table below sets outs the source, amount, activity, and procurement method and procurement plan reference. .
Provision has been made for retroactive financing under the IDA Credit and under the
Selected Network
cities and towns framework 250,000 TA Studies to develop small Con 8 QCBS
I Source I ~ m o u n t 1 Description o f Assignment I Procurement I Procurement I
62
Annex 9: Economic and Financial Analyses MOZAMBIQUE: Water Services and Institutional Support Project
Economic Analysis:
1. capacity o f five biggest towns o f Mozambique and to support a robust institutional structure in the water sector. Production capacity, increased f rom 66 m i l l i on m3 in 2000 to 87 mi l l ion m3 2006. WASIS, therefore, proposes to (1) create the networks that deliver the new production capacity to consumers and (2) increase capacity to implement a smaller cities and towns framework. A total o f 30 million, equally contributed by IDA and Afr ica Catalytic Growth Fund (ACGF) i s earmarked for this project, o f the total, 22 m i l l i on i s allocated for building distribution networks (Component A) and the rest to Component B. For the purposes o f economic analysis, there are many non-easily quantifiable benefits to Component B associated with capacity building and creating new institutional structure, therefore, for the purposes o f this analysis, only Component A will be analyzed in detail.
WASIS Project i s a repeater to the NWDP I1 that aimed to increase the production
2. calculate the ERR and NPV o f the Component A o f the project to which the project directly contributes with physical investments. The incremental economic benefits are projected over a 15 year period to arrive at the ERR and NPV based on a 10% (the hurdle rate IDA uses in WSS projects) discount rate. This methodology projects how behavior o f beneficiaries wil l change fol lowing the project intervention in the ‘with project’ scenario. In the ‘without project’ scenario, the current situation i s assumed to continue into the future.
A cost-benefit analysis using a “with and without project” methodology has been used to
3. project towns - Beira, Nampula, Pemba, and Quelimane which provides an opportunity for new consumers to connect to the network. Conservative estimates suggest that 10,000 new consumers will j o i n the formal network fol lowing the project implementation, with 80% of the connections occurring in the latter ha l f o f the project implementation after the pipelines are laid. The 10,000 new connections are expected to be in the form o f individual yard taps, which will add approximately 53,000 new consumers to the formal network (assuming average household size o f 5.3).
For component A, new networks that stretch up to 370 k m s will be installed in four
4. The primary water sources for households not connected to the formal network are neighbor’s yardtap, public standposts, wellsihandpumps. The Beneficiary Assessment notes that if given a choice, households prefer the neighbor’s yardtap compared to the standpipe due to factors such as time spent waiting at the source and aspects linked to the user’s convenience. Households report that they spend almost twice as much t ime at the standpipe waiting to collect water as they do at the neighbour’s tap. This may be because there are more people at the standpipe and because l o w water pressure makes filling recipients a slow process. Many households also prefer to obtain water at their neighbour’s tap because they are treated more personally than they are at the standpipe, and there are fewer conflicts between users.
5. The economic benefits f rom the new connections will mean that households previously dependent o n neighbor’s yard-tap or public standpipes or wells wil l move towards accessing water f rom a formal connection. The economic analysis quantifies the benefits accruing to the project beneficiaries - the newly connected households. The benefits can be quantified in the
63
form o f incremental expenditure on meeting the household water demand, and time savings as a result o f lower collection and wait time.
Figure A9-1: Major Sources o f Drinking Water
ajor Sources of Drinki
v) 100 3 8
80
60
40
20
0
c
3
I c
s
Beira Nampula Pemba Quilimane
Domestic connection Neighbours’ tap Public standpipe Handpumprnells W Other Sources
6. households in each ci ty dependent on each o f these sources i s used to calculate their current expenditure o n water supply. Those dependent on wells do not pay while those dependent on neighbor’s tap pay a higher than formal network tariff. The incremental water expenditure f rom the new connections wil l be minimal since households relying on neighbor’s tap are paying more, and households relying o n public standpipes and handpumps/wells are paying much less for a 20L bucket than their ‘post project’ scenario o f yardtap connection. The expenditure o n water for the newly connected consumers i s valued based on the average tar i f f for individual connections/yard taps which ranges from $0.45/m3 in Nampula and $0.51/m3 in Beira.
Based o n the beneficiary assessment carried out in 2003 for the NWDPII, proportion o f
Source: Beneficiary Assessment for NWDP 11,2003; WB-FIPAG Financial Model
64
7. incur time savings that can be quantified by valuing the t ime in the form o f wages lost due to the water collection activity. The economic benefits from the new connections primarily derive from these time savings. For instance, in Quelimane, an average household spends approximately 4 hours a day collecting water at the public standpost. At the public standpost and wells, the waiting, filling and carrying time for a 20L bucket can range between 17 minutes in Pemba to 79 minutes in Quelimane. In comparison, the water collection time i s 10 minutes at the yard tap for a 20L bucket. The time savings are valued at 50% o f basic industrial wage o f 1443 Meticais/month to account for unemployment and l o w opportunity cost o f time. The economic benefits f rom new connections primarily derive f rom time savings since household members particularly women and children spend a significant amount o f time daily in the water collection activity.
Accessing water f rom yard-taps and private standpipes also means that households wil l
Beira Nampula Pemba Neighbor’s tap 9 21 26 Public Standpost 35 28 17 WellsEIandpumps 31 30 48
Quelimane 44 79 78
8. economic NPV o f $5 1 mi l l ion and an ERR o f 60%. This implies that the project will be beneficial to the citizens o f the four cities o f Beira, Nampula, Pemba, and Quelimane in alleviating their water supply concerns.
The economic analysis suggests that the Component A o f the project has a positive
NPV 1 I EIRR 60% i
Financial Analysis:
9. Financial Analysis ofFPAG: Analysis has been carried out on the financial viability of FIPAG which i s the main service provider that would implement the main investments supported under the project.
10. Since its establishment in 1998, FIPAG’s overall financial performance has been improving over time. As it has taken on responsibility o f serving additional cities and towns over time, i t s revenue base has been growing. The delegated management model implemented in Maputo, Beira, Nampula, Quelimane, and Pemba has contributed to operational efficiencies and general improvements in the service. The financial projections indicate that FIPAG’s consolidated net income in 2007 i s expected to achieve a breakeven point, and continue to improve thereafter. The t imely implementation of the investments in network extension and new connections planned under the project would help FIPAG achieve fbll cost recovery, including the fbture debt service payments that wil l increase in the next 4-5 years. In addition to meeting the US$7 mi l l ion debt service obligations for IDA, FIPAG’s financial projections demonstrate that the debt service coverage ratio, one o f the key financial covenants, will continue to remain above 1.2 for the next fifteen years.
1 1. FIPAG’s financial model assumes that the operating revenues, expenses, and assets are recorded in al l cities while the assets and debt service payments are centralized. The cash flow projections are based on the fol lowing baselines and assumptions:
65
Financial Statements: Audited financial statements up to 2005 and 2006 provisional statements for Maputo and four Northern towns supported by IDA (Beira, Quelimane, Nampula, and Pemba). The assumptions for the four Southern towns (Inhambane, Xa i Xai, C h o k e , and Maxixe) supported by AfDB and the Dutch. Tarzfls: Increase at the rate o f expected inflation. Renewal and replacement of old networks: M i n o r (0.2 percent o f the major assets) renewal and replacement o f o ld network have been assumed to be funded by FIPAG’s consolidated cash flows. Costs of running the four Northern cities: Management contract fee for the four Northern cities has been assumed to continue at a rate o f US$550K (US$250K for management and US$300K for technical assistance) per year, paid out o f FIPAG’s consolidated cash flows beyond year 2007. New Connections: In addition to the new connections expected for the new networks funded under the project, i t is assumed that Beira will connect 6 per working day (p/wd), Nampula 6 p/wd, Pemba 6 p/wd and Quelimane 4 p/wd for the existing networks. I t is further assumed that every month has 22 working days.
150 -
100 -
Figure A9-2: Cash F low Projections FlPAG CASHFLOW PROJECTIONS (renewal I replacement from Internal sources)
’:
- Cash Flow From Operations --Cash Flow from Financing - Cash Flowfmm Investing i * Cummulalive Cash excl rew Western citles
Year
12. Financial AnaIysis of M U : To assess the l ikely operational support that i s required to run the systems in the small towns, a financial analysis has been carried out on the viability of the municipalities and small towns that are expected to be part o f the pi lot in the Northern provinces, including Nacala, Lichinga, Gurue, Angoche, Cuamba, Mocuba, and I lha Mozambique. A financial model with projections up to year 2029 was developed with the fol lowing assumptions:
Operational Costs: Operational costs per m 3 are broken into three categories: energy, chemicals and other operational costs. The annual total operational cost is the cost per m3 times the water produced.
Chemicals: On the basis o f practice o f Nampula in 2005, and taking into account the type o f treatment plant in some towns, the dosage media for water treatment are defined as chlorine, l ime and alum. The dosage times the volume o f water to be produced in each
66
year times a given cost for each chemical provides the annual chemical cost for each system.
Energy: Power cost for each year i s calculated assuming that the volume to be pumped i s proportional (at the same rate as in 2015) to water produced.
Maintenance: Percentage (1.5 percent) o f the accumulated value (excluding depreciation) o f investments. This cost would begin to be part o f the companies’ cost starting in 201 1 when some o f the new facilities begin to operate.
Staffand Salaries: Two “required staff ’ functions in terms o f number o f employees per 1000 connections were developed o n the basis o f data for FIPAG companies and other medium-sized systems. The functions reflect the economies o f scale and the range o f connections (between 500 and 30,000 connections) have been incorporated. To obtain the annual cost o f the personnel, the value given by the model has been multiplied by the units (domestic, stand points and non-domestic) served by the system and by the average cost o f staff.
0
Required Operational Support for the Seven Large Piped Systems and 10 Small Piped Systems
13. Based o n the model, the net cash deficits for the seven large piped systems in the municipalities under the period 2009 - 2012 would total about US$2.2 mi l l ion as summarized in the table A9-4. The main parameter here i s the required annual tar i f f increase at the expected rate o f inflation (1 0 percent). Without tariff increases, al l the companies would have an increasing deficit because the init ial tariffs do not cover operational costs and the costs keep increasing as the coverage expands. All the companies are expected reach the break-even point in 2015.
14. For the small piped systems, a differentiated tariff increase needs to be implemented to ensure a l l the towns reach cost recovery by 20 15. The real tariffs need to increase by 12- 16.5% from an init ial tariff o f US$O.l6/m3 across the 10 towns to reach the break-even point by 2015. In such a scenario, the balance would be posi the for 2014 and 2015 o f US$160,446. There wil l be a l iabi l i ty o f US$96,839 for the G o M for 2013 only. For the large piped systems, assuming an uniform rate o f tari f f increase o f 10% over seven years from 2009-2015, a l l the 7 towns will reach break-even point by 2015. Consequently, the liabilities for G o M will primarily be for 2 years after the W A S A project ends is US$621,691 for 2013 and 2014. In addition, revenues for the operations o f small and large piped systems show an increasing trend after the init ial capital investment i s made and as the systems become more self-sustaining and the incremental cost support i s progressively lower. Overall the net deficit for 2013 -2015 i s US$558,084 for the 17 towns.
15. The incremental operational cost upp port'^ for these systems in the WASIS project is estimated to be US$2.5 mi l l ion between 2009 and 2012. The 17 systems to be overseen by AMU are expected to improve services beginning in 2009 as the M C C investments are rolled out. The maintenance cost wil l increase in Year 4 (201 1) as the systems are expanded. As i s the case demonstrated in FIPAG, as the capacity o f the system increases new consumers will be able to connect to the systems however there i s a lag o f one to two years until the networks are fully operational. Consequently, it i s possible that the operational cost support will increase till year
” This support wil l b e l imi ted t o consumbles, utilities, rent, office supplies, petrol etc.
67
201 1 (PY 4) before declining in 2012 (PY5). The tariffs are expected to increase to support the move towards cost recovery since the current rates do not cover operational costs. Currently tariffs only cover about 52% o f operating costs, and tariffs per cubic meter o f about US$O. 16 which i s low18. There i s also a lag in regularization o f tariffs. Tariffs rise gradually as they are increased to reflect an improved level o f service. By 2015, when al l the systems are working, tar i f fs are expected to cover al l operating costs.
16. The time horizon used in the financial sustainability model for the systems is 201 5 while the incremental operational cost support implemented in the WASIS project will be effective only till 2012. The model estimates that in 2015 al l systems will cover costs. There i s however a concern that in 2013 and 2014 m e t operational costs will add to the liabilities for the GoM. This i s estimated at about US$97,000 in 2013 for the small piped systems and about US$600,000 for 20 13 and 20 14 for the larger 7 cities. In 20 15, the breakeven point i s reached and the systems are self-sustaining. If a higher increase in tar i f fs i s assumed at 16% in the large piped systems, then the breakeven point is reached in 2014.
This i s compared to Quelimane where average ta r i f f i s about US$ 0.50 per cubic meter. 18
68
Annex 10: Safeguard Policy Issues MOZAMBIQUE: Water Services and Institutional Support Project
1. WASISP is an EA Category B project since there may be minor construction environmental impacts and, perhaps, some land acquisition or compensation for losses and damages to property. WASISP will finance the network extensions, while yard connections will be completed under separate funding. Project c iv i l works will be comprised o f trench excavations, laying o f pipes and accessories, and back-fill ing including testing and commissioning.
2. The safeguard policies triggered by the project are: Environmental Assessment (Op 4.01), and
0 Involuntary Resettlement (Op 4.12).
3. These safeguard concerns will be readily managed by implementing FIPAGs Environmental Management System (EMS) and the Resettlement Pol icy Framework (RPF) prepared for the project. Final design o f the network extensions will consider alternative alignments to avoid or minimize adverse environmental and social impacts. The likelihood of large scale, significant, cumulative and/or irreversible impacts i s considered to be nil.
4. these safeguards instruments will be documented in the project legal agreement with IDA.
The Borrower’s responsibilities to implement WASISP according to the requirements o f
Environmental Assessment 5. To comply with the environmental assessment requirements o f both the World Bank and the GoM, FIPAG will prepare an Environmental Management Plan (EMP) for each major works package. The EMPs will be prepared according to FIPAG corporate procedures documented in:
a) Environmental Management System, EAPOO 1 (February 2003); b) Guidance o n Environmental Assessment and Management o f the NWDP (January
2003); and c) Generic Framework Environmental Management Plan for Construction Works
(February 2003).
6. and the Wor ld Bank, and publicly disclosed before finalization o f the construction tender documents. The construction contracts wil l thus include both general and, as needed, site- specific measures for avoiding or mitigating any adverse environmental impacts. Similarly, the construction supervision contracts wil l empower the Resident Engineer(s) and FIPAG’s Environmental Engineer(s) to ensure adequate implementation o f the prescribed measures.
According to these procedures, the EMPs will be prepared, approved by both the G o M
7. through contract arrangements between FIPAG and system operators.
These procedures also provide for environmental management o f network operations
Involuntary Resettlement
8. acquisition and compensation issues that the project may encounter. A s needed, Resettlement Action Plans (RAPS) will thus be prepared, approved by both the G o M and the World Bank,
The RPF prepared for the WASISP documents procedures for addressing any land
69
publicly disclosed, and implemented before construction begins. F P A G ’ s Environmental Engineer will be responsible for ensuring adequate implementation o f RAPS.
Borrower Capacity to Implement Safeward Requirements 9. for employing safeguards instruments to avoid or minimize adverse safeguards issues.
FIPAG has a well-developed capacity, and demonstrated commitment and track record,
Stakeholder Consultation and Disclosure o f Safeguard Documents 10. K e y stakeholders are the municipal authorities, and neighborhood leaders and residents, where the network extensions will be constructed. The former were consulted in preparing the RPF. The E M S and RPF were disclosed through the InfoShop on April 2,2007 and through FPAG offices o n April 2,2007. Final design o f the extensions, the construction plan and schedule, and applicable EMPs and RAPS wil l be discussed and agreed with stakeholders before they are finalized. EMPs and RAPS will also be publicly disclosed through FIPAG offices.
70
Annex 11: Project Preparation and Supervision MOZAMBIQUE: Water Services and Institutional Support Project
PCD review Planned Actual Dec 20,2006 Dec 20,2006
Initial PID to PIC Initial ISDS to PIC Appraisal Negotiations Board/RVP approval Planned date o f effectiveness
April 16,2007 May 3,2007 June 19,2007 SeDt 15.2007
Planned date o f mid-term review Planned closing date
Key institutions responsible for preparation o f the project: FIPAG DNA CRA
Sept 15,2010 Sept 15,2012
Bank staff and consultants who worked on the project included:
Bank funds expended to date on project preparation:
1. Bank resources: US$50,000
3. Total: US$141,000 2. Trust funds: US$91,000
Estimated Approval and Supervision costs:
1. Remaining costs to approval: US$12,000 2. Estimated annual supervision cost: US$150,000
71
Annex 12: Statement of Loans and Credits
MOZAMBIQUE: Water Services and Institutional Support Project
Difference between expected and actual
disbursements Original Amount in US$ Millions
Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d
PO93165
PO87347
PO86169
PO76809
PO71465
PO82618
PO01807
PO69183
PO78053
PO72080
PO73479
PO69824
PO01806
PO0 1785
PO01808
PO35919
PO70305
PO42039
PO52240
2006
2006
2006
2006
2006
2005
2004
2004
2003
2003
2002
2002
2002
2002
2001
2000
2000
2000
1999
MZ-Market Led Smallholder Dev (FY06)
M Z Tech & Voc Edu & Training (FY06)
MZ-Financial Sector TA Project
MZ-GEF TFCA & Tourism Dev (FY06)
TFCA & Tourism Dev (FY06)
MZ-Beira Railway SIL (FY05)
MZ-Decentr Planning &Fin S IL (FY04)
M Z - Energy Reform and Access SiL (FY04) MZ-HIV/AIDS Response S I L (FY03)
Pub Sec Reform (FY03)
MZ-Com Sec Reform
MZ Higher Education S I M (FY02)
MZ-Municipal Dev S IL (FY02)
MZ-Roads & Bridges MMP (FY02)
Mineral NRMCP (FYO1)
GEF Coastal & Marine SIL (FYOO)
MZ-Coastal & Marine Biodiv Mgmt (FYOO) MZ-Railway & Port Restr (FYOO)
Natl Water 2 (FY99)
0.00 20.00
0.00 30.00
0.00 10.50
0.00 0.00 0.00 20.00
0.00 110.00
0.00 0.00 0.00 40.26
0.00 0.00 0.00 0.00 0.00 14.90
0.00 60.00
0.00 33.60
0.00 162.00
0.00 18.00 0.00 0.00 0.00 5.60
0.00 100.00
0.00 75.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00
0.00 0.00
0.00
0.00 0.00
10.00
0.00 0.00 0.00 3.09
0.00
0.00 0.00 0.00 0.00
0.00 0.00 4.11
0.00
0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00
0.00 0.00
20.46
29.88
9.61
9.73
18.80
71.66
22.29
42.56
34.77
22.99
7.31
19.48
6.93
29.50
1.26
0.89
0.57
22.00
37.17
1.65
2.54
-0.09
0.75
-0.37
-7.18
5.28
28.71
0.79
19.79
4.38
6.69
10.47
3.74
-0.68 4.10
0.08
16.62
16.15
0.00 0.00 0.00 0.00 0.00 0.00
0.00
7.65
0.00 0.00 0.00 0.00 2.01
-22.27
0.00 3.53
-0.75
13.11
5.01 \ I
Total: 0.00 699.86 0.00 17.20 0.00 413.86 113.42 8.29
MOZAMBIQUE STATEMENT OF IFC’s
Held and Disbursed Portfolio In Millions o f U S Dollars
Committed Disbursed
IFC IFC
FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.
2004 ENH 0.00 18.50 0.00 0.00 0.00 13.37 0.00 0.00
GTFP BDC 0.11 0.00 0.00 0.00 0.11 0.00 0.00 0.00
1997 MOZAL 29.70 0.00 58.50 0.00 29.70 0.00 58.50 0.00
2001 MOZAL 10.12 0.00 0.00 0.00 10.12 0.00 0.00 0.00
2000 SEF Ausmoz 0.72 0.00 0.00 0.00 0.72 0.00 0.00 0.00
1997 SEF CPZ 1 .oo 0.00 0.00 0.00 1 .oo 0.00 0.00 0.00
2000 SEF Cab0 Caju 0.58 0.00 0.00 0.00 0.51 0.00 0.00 0.00
2001 SEF Grand Prix 0.33 0.00 0.00 0.00 0.33 0.00 0.00 0.00
2004 SEF Merec 1.02 0.00 0.00 0.00 1.02 0.00 0.00 0.00
Total portfolio: 43.58 18.50 58.50 0.00 43.51 13.37 58.50 0.00
72
Approvals Pending Commitment
FY Approval Company Loan Equity Quasi Partic.
Total pending commitment: 0.00 0.00 0.00 0.00
73
Annex 13: Country at a Glance MOZAMBIQUE: Water Services and Institutional Support Project
Sub- POVERTY and SOCIAL Saharan Low-
Mozambique Afrlca Income 2005 Population. midyear (millions) 8 8 741 2,353 GNI per capita (Atlas method, US$) 3 0 745 560 GNI(AtIasmethod, US5 billions) 6 1 552 1364
Average annual growth, 1999-05
Population (%J Laborforce (W
2.0 2.3 19 17 2.3 2 3
M o s t recent estlmste (latest year avallable, l999-OS)
Poverty (%of population belo wnationalpo vertyline) Urban population (Koftotaipopuiation) Life expectancyat birth (pars) Infant mortaltty(per 1OOOllvebiiihs) Chiid malnutrition (Kofchildmn under5) Access to animprovedwtersource (%ofpopulation) Literacy(%ofpopulation age 69 Gross primary enrollment (Kofschool-agepopulation)
Male Female
35 37 31 42 46 59 04 0 0 80 24 29 39 43 56 75
62 95 93 04 0 4 99 10 66 87 99
KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1981 1995 2004 2005
GDP (US$ bil/ions) 4 5 2 2 5 9 6 6 Gross capital formation/GDP 3 5 305 226 204 Eqwrts of goods and services/GDP 2 9 6 8 309 326 Gross domestic savlngs/GDP -51 5 0 143 0 7 Gross national savings/GDP -50 4 8 8 5 4 4
Current account biancdGDP -99 -301 -141 - 6 9 interest paynentslGDP 0 5 3 3 0 5 Total debt/GDP 644 3320 787
Present value of debt/GDP t36 Present value of debt/exports 43 0
Total debt servicelexports 345 348 4 4
1985-95 1995-05 2004 2005 2005-09 (average annual grovdh) GDP 3 6 8 4 7 5 7 7 7 3 GDP percapita 19 6 1 5 4 5 7 5 8 Exports Of goods and SeNICBS 9 0 8 0 s 9 8 3 0 8
Develo pment dlamond.
Life expectancy
T Gross
"1 capita t*enroliment prima-
Access to improvedwatersource
-Mozambique ~ Lowlncome gro up
Economic ratlo.'
Trade
T
savings Domestic I+ formation Capital
Indebtedness
-Mozambique - Lowlncomegmup
STRUCTURE of the ECONOMY
(%of GDP) Agriculture Industry
Services
Household final consumption expenditure Genera gov't final consumption expenditure imports of goods and services
Manufacturing
(average annualgmtdh) Agriculture industry
Services
Household final consumption expenditure General gov't final consumption expenditure Gross capital formation Imports of goods and services
Manufacturing
I S 8 5 I 9 9 5
47.5 36.9 0 .2 6.4
8.1 39.3 47.7
92.2 65.2 P.9 9.6 115 410
1985-95 1995-05
2.7 5.2 -12 6.7
.. 17.5 4.4 6.9
17 4.4 4.7 P.1 8.7 0 .6 2.5 9.8
2004
23.3 292 14.8
47.5
75.3 0.4
392
2004
6.3 5.1
02 8.9
0.9 5.0 -111 4.1
2005
22.3 29.8 14.2
47.9
79.1 0 .3 42.3
2005
18 9.9 0.7 0.0
0 .8 8.0 0.7 7.3
Growth o f capltal and GDP (%I
lW T
Growth o f exports and Imports (%I BO
-20 +G2eF?% Note: 2005 data are preliminaryestimates. This tablews producedfrom the Development Economics LDB database. 'Thediamonds showfourkeyindicators In thecountry(in bo1d)comparedwithits income-groupaverage. lfdataare missing,thediamondwill
be incomplete.
74
Mozambique
PRICES andGOVERNMENT FINANCE
Domestic prices (%change) Consumer prices Implicit GDP deflator
Government finance (%of GDP, includes currenf grantsj Current revenue Current budget balance Overall surplusldeficit
TRADE
(US$ millions) Total exports (fob)
Cashew nuts, raw cashew and cashew oil Prawn Manufactures
Total imports (cif) Food Fuel and energy Capital goods
Eport price index (2000=QOj Import price index(2000=QO) Terms of trade (2000-100)
BALANCE of PAYMENTS
(US$ mlliionsj Exports of goods and services Imports of goods and services Resource balance
Net income Net current transfers
Current account balance
Financing items (net) Changes in net reserves
Memo: Reserves including gold (US$ miiiions) Conversion rate (DEC,locai/US$)
1985
33.1
13.3 6.6
-13.3
I985
77 a
33
424
P 4 It3 11)
1985
143 48 1
-339
- 1)2
-440
420 21
46 43.2
EXTERNAL DEBT and RESOURCE FLOWS
(US$ mdhonsj 1985
2.871 iB RD 0 IDA 5
Total debt sewice 63 IBRD 0 IDA 0
Total debt outstanding and disbursed
Compositionof net resourceflows Official grants 774 Official creditors 377 Private creditors 54 Foreign direct investment (net inflows) 0 Portfolio equity(net inflows) 0
World Bank program Commitments 46 Disbursements 5 Principal repayments 0 Net flows 5 Interest payments 0 Net transfers 5
1995
54.4 50.3
25.5 4.9
-9.5
1995
774 0
73 5
727 44 68
166
177 P 3 96
1995
407 899
-492
-185
-677
736 -60
8 5 9,203.4
1995
7,458 0
890
8 2 0 6
770 772 24 45 0
99 160
0 160
6 154
2004
P.7 9 0
155 23
-9.1
2004
1504 29 93 8
2,035 164 290 703
P 9 a5 134
2004
1828 2,320 -492
-340 0
-832
1044 -2 P
1159 22,5813
2004
4,651 0
1,475
83 1
15
815 290 -23 245
0
0 5 8 0
4 186 P
774
2005
6 4
773 3 5
-5 6
2005
1745 23 72 22
2,467 8 2 34 1 872
‘62 0 4 10
2005
2.164 2,805 -642
-4 n 0
-1058
1003 55
1133 23.0610
2005
0 1575
1 27
227 14
2 0 14
199
---GDPdeflator --o-CPI
Export and import levels (US$ mill.)
3.0W T
2 OM)
1 ow
0
I O5 I 00 00 01 02 03 04
@Exports 8~lrnports
Current account balance to GDP (Oh)
Composltlon o f 2004 debt (US$ mlll.)
I G 345
1475
c 197
I D. 683
A - IBRD B - IDA D - Otherrmltilaterd F - Private C-IMF
E - Bilaterd
G . Short-tern
i
Note This table was produced from the Development Economics LDB database 9/15/06
75
Annex 14: HIV/AIDS Policy of Implementing Agencies
MOZAMBIQUE: Water Services and Institutional Support Project
National Level: At the National level there i s the National Council for the Prevention and Care o f H IV /A IDS in the workplace.
Cabinet Level: The Ministry o f Public Works and Housing has a Cabinet Office for the Prevention and Care o f HN/Aids in the workplace.
FIPAG: FIPAG has a pol icy o n H IV /A IDS with the aim o f developing actions for a prevention and care program.
FIPAG: HIV/AIDS Work Plan Annual seminars with al l FIPAG staff to inform al l employees o f the prevention and care o f HIV/AIDS. The seminars are delivered by experienced NGO’s dealing with al l aspects o f HIV/AIDS. The seminars are structured to raise awareness o f the magnitude and seriousness o f the threat posed by the disease in our societies and educate employees o n available preventive measures. Distribution o f awareness materials, posters, brochures etc, to provide further information on prevention and care o f HIV/AIDS. Encouragement for voluntary testing amongst employees. Affected employees are provided with free medical treatment and counseling Affected employees are provided with monthly basic food packages through a program o f the Cabinet Office for the Prevention and Care o f HIV/AIDS. FIPAG will continue to update the development plan with clear targets and responsibilities with each employee in order to generate positive attitudes in the workplace to prevent and manage HIV/AIDS and ensure that the mutual interests o f both managements and employees are met. Given the high costs associated with the fight against HIV/AIDS, FIPAG sees the way forward is to develop a strategy to establish future partnerships with other organizations to share the costs.
DNA: HIV/AIDS Work Plan The program to prevent the spreading o f H IV /A IDS has the following three categories: Prevention, Treatment and Care, and Mit igation and information gathering.
Prevention e
0
Distribution o f awareness materials, posters, brochures etc. to provide hr ther information o n prevention and care o f H IV /A IDS Inform the population the magnitude and seriousness o f the threat posed by the disease in our societies and educate employees o n available preventive measures Promote and inform the population to use masculine and feminine preservatives in case they have more than one partner Encourage the population to do voluntary testing and counseling
DNA i s planning to provide training to technicians in local and provincial level so that adequate information and support i s provided to the population.
76
Treatment and Care
0
0
Provide to affected people the adequate information and care o n HIV/AIDS issues Assigned (change) different tasks to reduce the stress to the infected people Inform the affected people where they can get the proper treatment and counseling, including diseases related with tuberculosis Provide information to the affected family members
Mitigation and information gathering 0
0
0
Update the development plan with clear targets and responsibilities with each employee in order to generate positive attitudes in workplace to prevent and manage HIV/AIDS Adjust the workforce as a result o f loss o f personal in workplace Provide to affected employees basic food packages to reduce the impact f i o m the medication Provide information to employees and families about the benefit plan and any changes that have been done
77
Annex 15: Africa Catalytic Growth Fund Request MOZAMBIQUE: Water Services and Institutional Support Project
1. Basic Project Information
Sector Manager/ Director: Jaime Biderman / Michel
Country Director: Michael Baxter
2. Country Justification This section addresses the eligibility criteria for high performing category o f ACGF projects. Provide one-paragraph showing evidence for each o f the following:
a. disaggregated.
A sound policy framework is in place as reflected in the country’s CPIA rating,
Mozambique has a sound pol icy framework in place, as reflected in the country’s overall CPIA rating o f 3.4 in FY 2004 and 3.6 in FY 2005. Details o f each CPIA rating for economic management (on average 4.2 in both FY2004 and 2005), structural pol icy (on average 3.2 and 3.3 for FY 2004 and 2005), pol icy for social inclusion and equity (on average 3.3 and 3.4 for FY 2004 and 2005), and public sector management and institution (on average 3.2 and 3.3 for FY 2004 and 2005) are detailed in the CPIA 2005 Benchmarking: Country worksheet for Mozambique.
b. A credible national strategy for shared growth is in place.
Provide evidence from the JSAN o f the countries PRS or a similar analysis by the donor community
Mozambique has in place a credible national strategy for shared growth. The government has been implementing its Act ion Plan for reducing absolute poverty (PARPA; the Mozambican Poverty Reduction Strategy Paper) for the period 2001-05 and has prepared a new PARPA for the period 2006-10. The latest Joint Staff Assessment o f PARPA implementation was completed in 2005 and found that the Government had implemented the PARPA successfilly by allocating incremental resources to the priori ty areas and by linking program implementation with the budget cycle. The JSAN also identified increasing revenues as one o f the areas where the Government should concentrate its effort. The JSAN for PARPA I1 i s currently under preparation for early FY07.
78
c. growth
Discuss the constraint to growth, the alleviation of which wi l l yield a sharp increase in
Whi le international experience attests that an educated workforce, domestic and international investors are attracted to “livable” cities with appropriate basic urban services, the water and sanitation service in smaller cities and market towns in Mozambique are very l o w in coverage and o f poor quality. The proposed project would improve the basic urban services in smaller towns and market centers and alleviate some o f the key constraints for growth in Mozambique. Increase in the number o f “livable” cities and market centers would also help establish focal points for surrounding agriculture areas which can serve as a central location for post harvesting facilities, aggregation o f products, diversification o f crops, and promotion o f business development etc. Reliability o f services has been identified as one o f the key constraints to the business environment in the 2002 Investment Climate Assessment (ICA).
d. the country.
Utilization of aid in the country, as reflected in the judgment of the donor community in
0 % o f problem projects and the number o f projects in the portfolio
The quality o f the portfolio i s satisfactory overall, with only one operation rated marginally unsatisfactory. The Second Poverty Reduction Support Credit (PRSC) recently disbursed the second US$60 mi l l ion tranche, and a third PRSC is under preparation. A C E M has recently been completed and ongoing non-lending services include a poverty assessment, a sub-regional growth study and two pieces o f PSIA. A joint Wor ld Bank Group CAS Progress Report was recently completed and discussed at the Board in March 2006. Dialogue o n a new CAS, to be prepared jo int ly with other development partners, has started.
0 This could be derived from a mutual assessment o f the donor community (as part o f commitments under Paris Declaration), or other jo int analysis (such as a budget support group or reflected in agreement on the JSAN)
Mozambique has made considerable progress in implementing the Paris Declaration Increased ownership and better articulated, realistic development priorities accompanied the harmonization process which developed f rom the 2004 Memorandum o f Understanding between Government and donors providing budget support. Government chose Joint and Mid- year Reviews as the chief vehicle o f donor support, replacing the traditional pledging approach o f Consultative Group meetings. Donor assistance continued to contribute for about 50 percent o f total spending, although aid modalities changed substantially, rapidly shifting f rom sector and project fbnding to direct budget support. Increased harmonization has helped focus on the PARPA objectives, catalyzing Government’s and donors resources toward the priori ty sectors o f the PARPA. Whi le coordination o f the budget support donors increased predictability o f resource flows, and monitoring o f long-term objectives and medium-term targets, budget support st i l l only accounts for 30 percent o f total aid.
79
3. Project Def ini t ion
a. Objective and expected results
Briefly describe how the ACGF is expected to contribute to broader development gains for the citizens in the country? Specify the expected result(s) to which the ACGF will contribute (for instance this might include raising the rate o f growth from around 5 percent to 8 percent, improved rates o f growth in non-traditional exports, reduction in the cost o f production, or improvements in hard to reach MDGs).
Mozambique is facing significant challenges in meeting the MDG goal seven, “ensuring environmental sustainability” and i t s subcomponents o f halving by 201 5 the proportion o f people without sustainable access to safe drinking water and basic sanitation. According to the jo int review in April 2006 and other available estimates, the coverage level for water supply i s about 40.4 percent for the country, about 60 percent for the urban areas, and about 27 percent for the rural areas. These coverage levels represent huge increases o f 17-37 percent over the past ten years due to the various reform initiatives undertaken in the sector, partly through the support provided by the Bank and other donors.
Meeting the MDG goal for sanitation i s a major challenge, as the coverage has to be raised from the current l o w level o f about 27 percent to 60 percent by year 2015. Cholera is endemic in major urban areas mainly due to lack o f adequate sanitation and sewerage services, compounded by poor water supply services. This and other health impacts caused by poor sanitation coverage even r isks meeting the MDG target o f reducing infant mortality.
Despite the improvements that have taken place in the sector, i t i s estimated that Mozambique would require at least US$20 mi l l ion annually for the urban water sector alone for the next ten years to meet the MDG goal”. The increasing f low o f funds from other financiers catalyzed by the proposed ACCF wil l contribute to meeting the overall MDG goal for Mozambique.
Describe h o w the ACGF will catalyze other funds, programs, or efforts to achieve results, as part of a broader package o f support (i.e. complements roads financed by the EU trust fund, or an IDA energy project).
Mozambique has, with support f rom the Bank, funded National Water Development Project (NWDP) 11, demonstrated a credible strategy to achieve progress in meeting the M D G s in water supply sector for the largest cities through its pol icy o f delegated management coupled with a robust regulatory framework, outcomes o f which have been cited in the recent mid-term CAS review as one of the five key successful CAS results. Therefore, in scaling up this model to other urban areas, Mozambique has so far attracted various other finding partners, including African Development Bank (ADB), European Union (EU), and European Investment Bank (EIB).
The proposed project o f scaling up the proven model to smaller market towns and sanitation in urban areas will catalyze funding from the Mil lennium Challenge Corporation (MCC), as it has shown strong interest in partnering with the Bank to incorporate and build on the Bank’s extensive knowledge and experience in building institutional capacity in the sector. Grant commitments from M C C in the order o f US$25 mi l l ion to the infrastructure investments in the
Detailed analysis of the investment requirements for meeting the MDGs, available hnding, and the funding gap are being 19
carried out by Water and Sanitation Program. Preliminary results will be collected f7om them by May 2006.
80
water and sanitation sector, and about US$75 mil l ion for towns and cities would have a high chance o f being confirmed if the ACGF can be tapped.
M C C i s also eager to help mitigate sustainability and implementation risks that the Bank has overcome, as demonstrated by i t s successful project outcomes. The Bank also brings flexible financial instruments that allow support to operations and maintenance in a controlled way to complement MCC’s advantage o f significant grant funds for capital investments.
Since the proposed ACGF and the M C C funds will be used for investments in urban centers, this i s l ikely to trigger other donors, including Nordic Development Fund, ADB, C I D A etc. to allocate their resources to the rural areas, contributing to achieving the overall MDG for the sector.
What i s the specific result expected from the ACGF project? H o w will the returns o f investment o f current activities in the area to be supported by the ACGF increase with this temporary increase in aid?
The US$20 m i l l i on proposed over 5 years would enable; (i) IDA to partner with M C C and bring essential institutional and capacity building experience and knowledge to a well-performing but s t i l l emerging sector; (ii) expand good practices and extend prudent financial discipline in future operations within the sector to assure financial sustainability; and (iii) establish new regional models for smaller market towns and sanitationhewer options using the delegated management model.
The key result expected from the proposed ACGF project is the increased coverage o f water supply in smaller cities and market towns, as wel l as increased coverage o f sanitation in larger cities. The returns o f investment o f current activities in the area to be supported by the ACGF wil l increase with this temporary increase in aid and contribute to growth o f the economy in Mozambique through; (i) enhancing the partnerships with and attracting investments from the domestic private sector; and (ii) establishing focal points for surrounding agriculture areas, as described in section 2. The project would also bring associated benefits in terms o f improved health and wel l being especially o f the poor and the middle class through improvements in the quality o f basic urban infrastructure services, namely, adequate water and sanitation.
b. Key Features and outputs for tracking progress Briefly describe the components o f the ACGF and associated outputs and intermediate results. Are these intermediate results deliverable by the ACGF alone, or only as a broader package?
The components that ACGF and IDA would support would include the broad categories o f institutional and regulatory pol icy support, operating support for fledgling institutions, and capacity building, in particular:
(i) Financial Mechanisms and Institutions: Interventions will include the development o f a delegated management approach for smaller towns and for sanitation in larger cities, taking into account the successful FIPAG model demonstrated under NWDP 11. I t is expected that different modalities o f financing will evolve. For example, new arrangements may include the use o f a “second” financing window under FIPAG to allow for grant financing o f infrastructure. Currently FIPAG is responsible for debt service payments. The same model o f delegated management may also be applied to sewerage and sanitation. These new institutions wil l need to
81
be supported through the init ial years o f operations with capacity building and operating costs as in the current Bank operations under NWDP 11;
(ii) Regulatory policies and institutions: At the policy-level, the new institutions wil l need to be supported by a good regulatory framework and institutions to implement the policies. The successful C R A (water regulatory agency) has managed to keep the sector o n track with respect to cost recovery and has led to its expansion based o n a strong commercial understanding and prudent pro-poor policies. The proposed project will continue to provide technical support to ensure that the appropriate regulatory, policy, and institutional framework will be implemented as the delegated management model i s scaled up in smaller cities, market towns, and sanitation.
The components that wil l be supported by M C C include the physical infrastructure investments in the participating municipalities whose population size totals almost one mil l ion:
(iii) Rehabilitation and expansion o f water supply systems in six municipalities in the Nor th o f Mozambique - Lichinga, Cuamba, Nacala, Angoche, I lha de Mozambique, and Mocuba.
(iv) Rehabilitation and expansion o f seven municipal sanitation and drainage systems in principal cities in the Nor th - Pemba, Nampula, Nacala, Angoche, I lha de Mozambique, and Mocuba.
The intermediate results that are expected to be delivered by the ACGF alone would be the strengthened institutional framework for implementing the delegated management model for smaller cities and market towns, as wel l as sanitation in larger cities. The intermediate results that are expected to be achieved through a broader package o f funding from M C C and other financiers would include improvements in water supply services in the project towns and market centers, donor harmonization o n pol icy and implementation aspects, and expanded partnerships with the domestic private sector, decentralized municipal institutions, and c iv i l society organizations.
Are any safeguard policies triggered by the ACGF project? If so, are these already addressed?
An Environmental Assessment (EA), containing an Environmental Management Framework (EMF) was carried out for NWDP 11. Procedures for addressing the resettlement and other safeguards policies have been incorporated in the project implementation manual. The only potential environmental issue raised was the effect o f improved water supplies generating increased wastewater in the cities. The proposed project would address this issue through funding sanitation and sewerage investments. Therefore, i t i s expected that no major safeguard policies are expected to be triggered for the repeater project.
In addition, appropriate capacity building activities have already been carried out to ensure proper management and monitoring o f the EMF by al l concerned sector stakeholders, including the National Directorate o f Water (DNA), FIPAG, and CRA.
82
c. Implementation and Risk
DateEffective
Estimated Disbursements IDA March 8,2000 operation (NWDP 11)
Estimated Disbursements IDA TBD operation (NWDP 111) Estimated disbursements ACGF January 1,2007
0 Describe the implementation arrangements for the ACGF. Are these already part o f an IDA supported operation?
FY07 FY08 FY09 FYlO F Y l l Expected Closing Date
Undisbursed March 30, amount as of 2008 September 21,2006 total US$42 million
0.5 1 .o 1.5 1.5 0.5 TBD
0.5 2.5 4 4 4 December 31,
The implementation arrangements would be modeled o n those o f the ongoing NWDP 11. These innovative institutional arrangements supporting the delegated management approach include: (i) an asset holding organization (FPAG) which contracts with private operators; (ii) a strong regulatory institution (CRA) that has provided financial discipline and a pro-poor approach in the sector. All major cities included in NWDP I1 cover operating costs and some debt service, which is a significant accomplishment, and service standards have improved significantly. This model has proven to be successful in ensuring “sustainability” o f the operation, a key ingredient for meeting the MDG.
Technical Assistance for institutional strengthening, training, and studies
0 H o w will the ACGF be monitored (what are the organization responsible, etc.)?
ACGF MCC IDA 1 5
FIPAG has been very successful with respect to monitoring outcomes o f i t s various projects and sub-projects due to the system o f contracting out and the records kept o f the outputs o f the contractors. These are part o f the “delegated” management system and this data i s needed for various contractual payments and i s mandatory for the contracts. These data include improvements in service levels, quality o f water, efficiency o f the service, etc. These are also tracked by the independent regulator (CRA) with respect to consumer satisfaction.
0 Does the ACGF pose any additional risks and mitigation measures? If yes, please describe using the table below:
and financial perspective, by FIPAG to take on the responsibility of expanding its operation to include additional cities, market centers, and the sanitation sector.
Risk I Risk Mitigation Measure I Risk Rating with Mitigation Capacity constraints, both from the institutional I Thorough review and assessment I Since the magnitude of the new I
would be carried out with respect to the capacity of FIF’AG in taking on additional investments and responsibilities.
Co-financing with MCC may cause difficulty in coordination.
Close coordination will be ensured with MCC, including joint missions (including Bank’s participation in MCC’s kick off meeting scheduled to be held in Maputo on April 24-25 2006), sharing o f project documents, and frequent communication.
investments are similar to the disbursements of the NWDP I1 project (US90 million) which closes in October 2007, the risk i s expected to be modest, if combined with the proposed risk mitigation measure. With the proposed mitigation measures, the risk i s considered as low.
83
water supply systems in six
sanitation and drainage systems
1,500 wells and boreholes, rehabilitation and expansion o f
* T h i s i s a preliminary estimate based on the actual costs incurred for the ongoing NWDP I1 project.
4. Assurance o f Absorptive Capacity.
a. Current Project Status for on-going operations only, data generated by system)
(Extracted from the ongoing NWI
-~
b. 0
Brief discussion of current capacity to absorb and manage ACGF funds Please brief ly summarize financial management, procurement arrangements necessary for management o f ACGF funds.
FIPAG has built up procurement and financial capacity within its organization during the implementation o f NWDP 11, including the establishment o f “in house” capacity with respect to environmental and social safeguard issues. I t i s expected that FIPAG will be able to undertake these functions for the new grant.
0 Briefly summarize any issues with project management (for on-going IDA operations that the ACGF will complement) and h o w they will be addressed to ensure ACGF’s efficient implementation and achievement o f results.
As described in the r isk matrix, there are capacity constraints, both from the institutional and financial perspective by FIPAG to take o n the responsibility o f expanding its operation to include additional cities, market center, and sanitation. The team’s preliminary analysis indicates that the suggested project size, which i s similar to the magnitude o f the new investments funded under the NWDP I1 project, is an appropriate size for the proposed project scope and timeframe. Even if there were additional funds available immediately, FIPAG would not have been able to absorb much more than what i t already has. I t i s suggested that a capacity assessment and future plans for expansion be carried out under the technical assistance component o f the project.
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5. Processing
a. Brief explanation of the preparation phase H o w much time wil l be required to prepare the operation and what are the next steps?
The project preparation for the components funded by ACGF would be carried out during the fiscal year 2007 in coordination with the supervision o f the ongoing NWDP 11. The fol lowing next steps are proposed; (i) Project Concept Note review by October 30 2006; (ii) Appraisal by February 28 2007; and (iii) Approval by M a y 3 1 , 2007. Preparation for the M C C funded component which will be carried out in parallel i s expected to be completed by December 2006. This would enable project implementation starting January June or July, 2007.
0 Who is the proposed team?
The proposed team will consist o f Jane Walker, M ido r i Makino (co-task team leaders), Luiz Tavares (water and sanitation engineer) Devendra Bajgain (safeguards), and Ri ldo Santos (operational support) o f AFTU1 and Slaheddine Ben-Halima (procurement) o f AFTPC and Joao Tinga (financial management) o f AFTFM. Additional technical expertise wil l be tapped as and when i t i s identified to be required during the course o f project preparation.
b. Please describe the expected preparation costs
The expected preparation costs for the proposed M C C investments wil l be borne by MCC. The Bank would need to finalize the project components and implementation plan, and update the fiduciary aspects (financial management and procurement) as well as the safeguards aspects (environmental and social) o f NWDP 11. The Bank budget required to undertake these preparatory activities, including staff time and travel are expected to total about US$120K for fiscal year 2006/7 in addition to the regular supervision budget for the ongoing NWDP 11.
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Annex 16: Maps
MOZAMBIQUE: Water Services and Institutional Support Project
86
MAP SECTION
Montes NamuleMontes Namule(2,419 m)(2,419 m)
Mo
za
mb
iq
ue
Pl a
i n
M o z a m b i q u e
P l a t e a u
MAPUTOMAPUTO
G A Z AG A Z A
S O F A L AS O F A L A
T E T ET E T E
Z A M BZ A M B É Z I AZ I A
N A M P U L AN A M P U L A
C A B OC A B OD E L G A D OD E L G A D O
N I A S S AN I A S S A
Limpopo
INHAMBANEINHAMBANE
MANICAMANICA
GuijaGuija
MassingirMassingir
ChicualacualaChicualacuala
MapaiMapai
MoambaMoamba
EspungaberaEspungabera
ChiguboChigubo
MachaílaMachaíla
PandaPanda
GorogosaGorogosa
SenaSena
ChangaraChangara
CatandicaCatandica
InhamingaInhaminga
MontepuezMontepuez
MuedaMueda
MarrupaMarrupa
CaturCatur
MetangulaMetangula
Alto MolócueAlto Molócue
RibáuRibáuè
GuruGurué
CuambaCuamba
NamacurraNamacurra
MocubaMocuba
MoatizeMoatize
SongoSongoZumboZumbo
FíngoFíngoè
FurancungoFurancungo
MualadziMualadzi
MilangeMilange
LichingaLichinga
ChimoioChimoio
TeteTete
ChibitoChibito
MatelaMatela
NampulaNampula
Monte BingaMonte Binga(2,438 m) (2,438 m)
To To LusakaLusaka
To To PetaukePetauke
To To LilongweLilongwe
To To MangocheMangoche
To To MtwaraMtwara
To To ZombaZomba
To To BlantyreBlantyre
To To ChipataChipata
To To MutokoMutoko
To To HarareHarare
To To MasvingoMasvingo
To To MasvingoMasvingo
To To RutengaRutenga
To To MessinaMessina
To To NelspruitNelspruit
To To MbabaneMbabane
S O U T HS O U T HA F R I C AA F R I C A
SWAZILANDSWAZILAND
Z I M B A B W EZ I M B A B W E
Z A M B I AZ A M B I A
T A N Z A N I AT A N Z A N I A
MALAWIMALAWI
LakeLakeMalawiMalawi
Zitundo
Manhica
Guija
Massingir
Chicualacuala
Mapai
Moamba
Nova Mambone
Espungabera
Inhassôro
Vilanculos
Chigubo
Machaíla
Inharrime
Panda
Chibito
Gorogosa
Sena
Changara
Catandica
Inhaminga
Pebane
Angoche
Nacala
Montepuez
MuedaMocimboada Praia
Marrupa
Catur
Metangula
Alto Molócue
Ribáuè
Gurué
Cuamba
Namacurra
Mocuba
Moatize
SongoZumbo
Fíngoè
Furancungo
Mualadzi
Milange
Moçambique
Xai-Xai
Matela
Beira
Chimoio
Quelimane
Tete
Nampula
Inhambane
PembaLichinga
MAPUTO
S O U T HA F R I C A
SWAZILAND
Z I M B A B W E
Z A M B I A
T A N Z A N I A
MALAWI
MAPUTO
G A Z A
S O F A L A
T E T E
Z A M B É Z I A
N A M P U L A
C A B OD E L G A D O
N I A S S A
INHAMBANE
MANICA INDIAN OCEAN
Lago deCahora Bassa
LakeMalawi
Lugenda
Messalo
Lúrio
Ligonha
Licungo
Zambeze
Buzi
Save
Changane
Zambeze
Limpopo
To Lusaka
To Petauke
To Lilongwe
To Mangoche
To Mtwara
To Zomba
To Blantyre
To Chipata
To Mutoko
To Harare
To Masvingo
To Masvingo
To Rutenga
To Messina
To Nelspruit
To Mbabane
Mo
za
mb
iq
ue
Pl a
i n
M o z a m b i q u e
P l a t e a u
Monte Binga(2,436 m)
Montes Namule(2,419 m)
30° E 35° E
30° E 35° E 40° E
25° S
20° S
15° S
10° S
25S
20° S
15° S
10° S
MOZAMBIQUE
0 50 100 150
0 50 100 150 Miles
200 Kilometers
IBRD 35608
JULY 2007
MOZAMBIQUEWATER SERVICES AND
INSTITUTIONALSUPPORT (WASIS) PROJECT
PROJECT CITIES
SELECTED CITIES AND TOWNS
PROVINCE CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
PROVINCE BOUNDARIES
INTERNATIONAL BOUNDARIES
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.